How Much House Can You Afford?
Use this calculator to estimate the monthly housing costs that fit your budget.
Are you looking to buy a house but don’t know how much you can spend?
Financial planners often use the housing costs/income ratio as a starting point to figure out a homebuyer’s budget. Most people can comfortably devote 28% of their gross income to housing costs.
Your housing costs include your monthly mortgage payment (principal and interest), plus:
- Homeowners insurance
- Property taxes
- Any homeowners association dues
It’s important to factor in these other costs, because they’ll determine what you can actually afford. You might like the sticker price on a home, but a steep HOA fee or high insurance costs can quickly eat into your budget.
In practice, your insurance and property taxes might get bundled into your monthly mortgage payment. Your mortgage lender will set aside money in an escrow account to cover your taxes and insurance for the year. The lender will then use the money in escrow to pay those bills when they’re due.
Calculator: Estimate How Much You Can Afford to Spend on a Home
The calculator below will give you an estimate of the home price you can afford given your gross income and how much you have saved for a down payment. Plus, see what your monthly housing payments might look like.
Have a particular home in mind? Adjust the price to see whether it’s in your budget, according to the 28% rule.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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