PenFed Mortgage with Confidence


How Much Mortgage Can I Afford?

What you'll learn: Understand the factors and costs that go into homeownership


How much home can you afford?

Deciding what you’re able to spend on a home when you’re looking to buy is one of the first things you’ll want to figure out. That way, you’ll know how to manage your search. Before shopping, answer these questions, “Can I afford to buy a home?”, “Can I afford a mortgage?” and How much home can I afford?” Having these answers will help move you towards mortgage approval. Knowing your budget and planning ahead will make the home buying process easier too.

Here is a general guide to knowing how much home you might be able to afford. Keep your housing expenses at or below 28% of your total gross income. Also, your total expenses (including housing) should be under 36%. This is the 28%/36% rule. These percentages are the optimum amounts, but every borrower has different circumstances. In some instances, higher housing costs can be acceptable.

There are four steps to take to look at affordability and what realistically fits your budget, including:

Can I afford a mortgage? Start with your income.

To know what you can afford, let's start with your income. List out all your earnings before taxes. That includes:

  • Military income
  • Salary & wages
  • Self-employment
  • Social security
  • Alimony 
  • Child support
  • Investment income
  • Retirement
  • VA Benefits
  • Rental income

Note – to count income; it needs to be consistent with the expectation of lasting three more years. Write down your monthly income amount.

Can I afford to buy a home? What are my current expenses?

List your existing expenditures. That way, you have a complete view of what you have to pay each month. Include the minimum payments the lender will find on your credit report for:

  • Credit cards
  • Auto payments
  • Child support
  • Student loans
  • Other bank loans
  • Other mortgages
  • Loans you’re a co-signer on

Then you can determine what you have available for your mortgage and other home costs. Make sure you also account for regular additions to your emergency fund. And put aside some savings for any homeowner expenses. These extra expenses could include repairs, maintenance, upgrades, and more.

What are the other expenses you’ll need to cover for your new home?

Look at all your existing expenditures, so you estimate the costs outside of the mortgage. Some ordinary homeowner expenses you’ll likely want to consider include:

  • Homeowner’s insurance
  • Homeowner association fees*
  • Pest and termite control
  • Landscaping costs
  • Utilities

*You’ll likely need to factor in more if you are buying a condo or townhouse or will be living in a community with amenities like a pool and clubhouse.

Take into account the property taxes in the area you’re planning to buy. And, consider if you’ll need to pay private mortgage insurance (PMI).

The Consumer Financial Protection Bureau explains it as, “Private mortgage insurance, also called PMI, is a type of mortgage insurance you might be required to pay for if you have a conventional loan.”

Typically, if you’re placing 20% as a down payment, you can avoid PMI – or if you’re getting a VA loan.

How much home can I afford? Calculate your monthly mortgage costs.

Use our “Get My Rate” tool. You’ll learn what the estimated monthly payments will be for the mortgage you’re looking to get. Make sure to compare VA if you’re a service member, veteran, or surviving spouse.

There are various mortgage options. These include conventional fixed-rate mortgages, VA, and jumbo home loans. You can understand all your options by contacting our PenFed team.

To learn more about PenFed mortgages or what option is right for you:

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