How much house you can afford

What you can truly afford isn't always accurately depicted from an online calculator.

Income and savings matters—but so does your lifestyle

Good news: Answering the question, “How much house can I afford?” does not require calculus-level math skills. You just have to start with Trulia’s housing affordability calculator, and then factor in a set of facts about your life.

The life stuff is just as important as the calculator. Things like student loans, local cost of living, childcare, and your hobbies will affect how much house you can afford. And a mortgage lender can lend you as much as you can “reasonably afford,” which could be more than you want to pay. Here’s how to set the right budget for yourself.

Here’s how to determine “How much house can I afford?”

  • Estimate your down payment

Your house budget is based on how much you can afford to pay each month and how much you have to put down. While a 20 percent down payment is ideal, the majority of first-time homebuyers actually put down between 5 and 10 percent.

When deciding how much you’ll put down, keep in mind how that the amount will affect how much house you can afford. For one, the more you put down, the less you’ll need to borrow in your mortgage, and the less you’ll pay each month. Also, if you put down less than 20 percent, you’ll need to calculate private mortgage insurance, or PMI, into your monthly mortgage payment. PMI is typically 0.2 percent to 1.5 percent of your loan.

When adding up how much you have saved for a down payment, don’t forget to leave room in your savings for closing costs, which will run 2 to 5 percent of the total cost of the home.

  • Map out your (realistic) monthly budget

It can be tempting to take the maximum amount a mortgage lender will give you and buy the biggest, nicest house you can. But if you have monthly expenses for things that make you happy or things you need—anything from yoga classes to your health insurance premium—make sure you don’t take a mortgage that’s so large you have to make lifestyle changes you don’t intend to make.

Take a look through your monthly budget to determine what payment would fit into your life today, and base your house-hunting budget on that intel.

  • Use your debt (or lack of debt!) as a guide

Most people have debt. Because a mortgage is going to add to that debt, taking the sum of your total debt now can help you determine how much more debt you should take on to buy a house. Here are three ways to use your debt to determine your housing budget:

  • One rule of thumb says you can afford a home that’s three to five times your household income—depending on your debt. So if you have $100,000 in income and no debt, feel free to consider that $500,000 mid century modern ranch you’ve had your eye on. But let’s say 20 percent of your income goes to paying down debt—then you’ll want to look at homes closer to the $300,000 range.

  • Your mortgage payment, including taxes and insurance, shouldn’t exceed 28 percent of your pre-tax income.

  • All your debt—including your future mortgage payment—shouldn’t exceed 36 percent of your pre-tax income.