If you’ve ever sat down with a cup of coffee and an open laptop, looking at homes for sale in your dream neighborhood, you’ve probably asked yourself: “How much house can I actually afford?” The answer isn’t always as straightforward as it seems. In my own experience—having walked through this journey myself and guided many others through it as an advisor—figuring out your budget isn’t just about plugging numbers into a calculator. It’s a combination of math, careful attention to your finances, an honest assessment of your lifestyle, and understanding how lenders see you.
Let me walk you through what I’ve learned, in the simplest way possible. By the end of this guide, you’ll have a clear view of what you can realistically spend on a home—and how Heart Mortgage makes that process easier and more transparent for anyone excited (and maybe a little overwhelmed) about getting those keys.
The real meaning of “home affordability”
When friends ask me the classic question about what price home they “should” buy, I always start with a simple truth: it isn’t about picking a number you want, but about knowing how that number fits your life now and in the future. Too many people think qualifying for a mortgage is like winning a prize. But a lender’s maximum and your personal comfort limit often aren’t the same thing.
Home affordability means finding the balance between what a lender will approve and what fits your budget, goals, and peace of mind.
The number is built from several parts:
- Your total income (before taxes)
- Your monthly debts (car loans, student loans, credit cards, and yes, those small payments count too)
- Your available savings for a down payment and closing costs
- Your credit score
- Your expected property taxes, homeowner’s insurance, and—if needed—private mortgage insurance (PMI)
As I’ve seen time after time, ignoring even one of these can lead to disappointment or costly mistakes.
What lenders look for when you apply
Lenders have a method that, once you understand it, can take away a lot of the confusion. When reviewing your mortgage application, most lenders focus on:
- Gross monthly income: Before taxes, this is the foundation of your application.
- Monthly debts: Not just your rent. Car loans, student loans, credit cards, and other obligations, even alimony or child support, go into this calculation.
- Down payment: A bigger down payment isn’t just about making a strong offer. It often means lower rates, no PMI, and smaller monthly payments.
- Credit score: This three-digit number has a big impact—higher scores mean lower rates and more choices.
In my work, I’ve noticed some people forget about debt or don’t realize how much it truly affects loan approval. Even if you make a strong salary, high monthly obligations can limit the size of your loan.
Understanding the 28/36 rule: The backbone of affordability
Let me introduce the classic 28/36 rule, something I keep coming back to when advising friends or clients. Most mortgage professionals—including those at Heart Mortgage—use this guideline:
- 28% of your gross monthly income is the most you should spend on your monthly housing payment (principal, interest, taxes, insurance, and any homeowners’ association fees).
- 36% of your gross monthly income is the upper limit for your total monthly debts combined (mortgage + all recurring monthly debt payments).
Here’s a quick example, to illustrate:
If your gross monthly income is $7,000, your ideal maximum housing payment is $1,960 (28% of $7,000).
Your total debts—including your new mortgage—should not exceed $2,520 (36% of $7,000). If you already have $600 in monthly debts (say, auto and student loan payments), then the lender will generally approve you for a mortgage payment of up to $1,920.
The 28/36 rule doesn’t guarantee comfort, but it is a smart “guardrail” to keep you from getting in over your head.
How mortgage calculators help your planning
One of the resources I often recommend is a well-built online calculator, such as the home affordability calculator from Heart Mortgage. It lets you play with the most common variables: income, debts, down payment, loan term, interest rate, local taxes, and insurance estimates.
Here’s how I use it with buyers:
- Enter your gross monthly income
- List all your monthly debts
- Add your available down payment
- Input an estimated property tax and home insurance
- Set a likely interest rate (you can get current averages from your mortgage expert)
- Adjust home price or monthly payment to see how much you can borrow comfortably
Calculators give you a quick glimpse into your borrowing power. But numbers on a screen aren’t the full story. Always factor in your own spending, savings goals, and comfort level.
The role of credit score and loan types
Credit scores are like a quick report card for lenders. They sum up how you’ve managed money and loans over time. In my experience, many first-time buyers overestimate how “perfect” their score must be, or underestimate the impact of even one missed payment.
Here’s how your score changes your options:
- 740 and up: Best rates and broadest loan selection
- 700–739: Very good, still excellent rates
- 620–699: Qualify for many loans, but expect slightly higher rates or restrictions
- Below 620: Options exist, but expect higher interest and, sometimes, more documentation
You may be surprised that not all loans are created equal. Common home loan types include:
- Conventional loans: Require higher credit and, often, 5–20% down, but offer strong long-term value.
- FHA loans: Lower credit and down payment needs, backed by government insurance.
- VA loans: Unique options for active or former military, often requiring $0 down.
In my opinion, talking to a mortgage expert early helps you understand which loan types fit your history and plans. Heart Mortgage, for example, draws on a wide range of programs, including support for those with limited or complex credit profiles.
Counting all the costs: What’s in your monthly payment?
When I bought my first home, I was shocked by how many costs went into the payment—far more than just the amount borrowed. Make sure you understand these “hidden” pieces:
- Principal: The amount that goes toward reducing your loan balance.
- Interest: What the lender charges for the loan.
- Property taxes: Paid yearly to your local government; often collected monthly by your lender.
- Homeowner’s insurance: Protection for your home is usually required by your lender; also collected monthly.
- Private mortgage insurance (PMI): If your down payment is less than 20%, this will likely be required. It protects the lender and adds to your cost.
- HOA fees: If you buy in a community with shared spaces or amenities, budget for this extra amount.
You’ll also need to prepare for one-time costs at closing:
- Origination and underwriting fees
- Title insurance and appraisal
- Government recording charges and transfer taxes
- Prepaid taxes and insurance
It’s easy to forget about closing costs. They often total 2–6% of your home’s price.
It’s smart to overestimate rather than underestimate these fees.
Making your dream more affordable: Strategic tips
I’ve seen plenty of buyers, especially those looking for their first purchase, assume they’ll never be able to afford what they want. While not everyone’s situation allows for big changes quickly, there are some steps that can help most people improve what they can buy:
- Increase your down payment: Every extra $1,000 reduces your monthly payment and possibly eliminates PMI.
- Boost your credit score: Even small improvements—like paying off a credit card or disputing an old error—can lead to real savings on your interest rate.
- Reduce debts: Lower monthly obligations means you qualify for more.
- Add a co-borrower: Sometimes having a partner or family member on the loan increases both total income and flexibility.
- Lengthen your loan term: Choosing a 30-year rather than a 15-year loan can drop the payment, but always weigh the cost over time.
- Look at alternate locations or home types: Sometimes a nearby town or a townhouse rather than a single-family home can stretch your options.
- Explore special mortgage programs: Some lenders, including Heart Mortgage, offer programs for first-time buyers, those with moderate credit, or those in special professions.
Advice for first-time buyers
Looking back on the first time I went through the mortgage process, I can say: starting early and getting organized makes the whole process much less stressful. There are a few steps that I believe make a real difference:
- Get pre-approved before shopping: This isn’t just a letter. It gives you a clear limit and helps you stand out with sellers. If you don’t know how, Heart Mortgage’s blog guide to mortgage preapproval explains every step.
- Organize your paperwork: Lenders want recent pay stubs, W-2s, two years of tax returns, recent bank statements, and records of any assets, like retirement accounts or investments.
- Know your “non-negotiables”: Be honest with yourself about what features or locations matter most.
- Learn the basics about mortgage types and programs: Consider reading Heart Mortgage’s resources for first-time buyers and homebuyer tips. I’ve seen buyers save thousands by understanding their choices early.
- Build a safety cushion: When calculating what you can afford, always leave room for unplanned costs. Roofing and plumbing issues rarely announce themselves.
Why a realistic budget matters
It’s possible to qualify for a bigger loan than you feel comfortable repaying. That’s why, in my opinion, your comfort and long-term security matter more than anyone’s approval letter.
A mortgage should be a foundation, not a burden.
When I help buyers set their budgets, we talk honestly about their monthly spending, savings habits, other goals (like travel or continuing education), and the surprise expenses life throws. Pushing to your limit can be stressful—leaving breathing room lets you enjoy your new place, not just pay for it.
The value of expert guidance
I’ve guided many through this process, and I can tell you: It never hurts to have ongoing, honest help. A good mortgage specialist isn’t there just to get your approval, but to help you understand your options, prepare your documents, and answer your questions, even about the “what ifs.”
At Heart Mortgage, the team provides not just preapprovals and rate quotes, but personal guidance for anyone navigating the process—especially if your credit is less than perfect, you’re self-employed, or your scenario is complex.
The right help turns a confusing process into a confident decision.
Conclusion: Your next step to homeownership starts here
Standing on the doorstep of your future home is one of the greatest milestones. The journey begins not with an address, but with an honest look at your budget, your debts, your savings, and a good understanding of what makes your heart happy—even if that means a simpler house now with room to grow later.
Through the experience of helping others and going through it myself, I can say: The best time to set your limit and learn about mortgage solutions is before you fall in love with a particular house. That way, you’re ready not just to “buy a home” but to make a smart, empowering choice that fits your life.
If you want someone in your corner from those early questions to the final signatures, look to Heart Mortgage for honest advice, clear options, and a real partnership. Start shaping your future now—reach out, try our tools, or talk to our team. Owning your home (and your peace of mind) can be closer than you think.
Frequently asked questions
What is the 28/36 rule for mortgages?
The 28/36 rule is a common standard lenders use to assess how much of your income should go towards your home and other debts. The first number—28%—is the suggested maximum portion of your gross monthly income for your mortgage payment (including principal, interest, taxes, insurance, and HOA fees). The 36% refers to the total limit for all monthly debt payments combined. If your gross monthly income is $6,000, ideally your mortgage payment should not exceed $1,680, and all debts together should not be more than $2,160.
How do lenders calculate home affordability?
Lenders use your gross monthly income, all fixed monthly debts, credit score, down payment size, and expected property taxes and insurance costs to determine your borrowing limit. They’ll apply the 28/36 rule and review your documentation to ensure your financial stability. Many also consider your employment history and savings. If you want to check what you might qualify for, an affordability calculator can give you a quick idea.
What costs are included in home ownership?
When you own a home, your monthly bills include more than just your loan repayment. Expenses to plan for are principal, interest, property taxes, homeowner’s insurance, mortgage insurance if you put less than 20% down, and possibly HOA fees. There are also closing costs during the purchase (such as lender fees, title, and appraisal charges) and ongoing costs for maintenance and repairs. Budgeting for these keeps you prepared for the true cost of owning a home.
How can I increase my buying power?
Boosting your credit score, increasing your down payment, reducing existing debt, and considering a longer loan term can all make it possible to buy a higher-priced home. Including a co-borrower’s income or exploring loan programs designed for first-time buyers or those with special situations can also help. Even small changes can translate to thousands of dollars in additional buying power.
Is it better to rent or buy now?
Deciding whether to rent or buy depends on your goals, finances, and market conditions. Buying lets you build equity, lock in payments, and create a permanent home, but it also requires readiness for the upfront costs and commitment. Renting can be more flexible for short-term needs or uncertain circumstances. If you’re unsure, speaking with a mortgage advisor like those at Heart Mortgage can help you weigh the pros and cons for your situation.
