{"id":14086,"date":"2025-01-15T02:00:24","date_gmt":"2025-01-15T10:00:24","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=14086"},"modified":"2025-10-29T09:09:07","modified_gmt":"2025-10-29T16:09:07","slug":"buyer-how-much-house-can-i-afford-rule-of-thumb","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-how-much-house-can-i-afford-rule-of-thumb\/","title":{"rendered":"10 Rules of Thumb to Determine How Much House You Can Afford"},"content":{"rendered":"<p>Think you\u2019re financially ready to buy a house? Before you make appointments with <a href=\"https:\/\/www.homelight.com\/find-real-estate-agents\">real estate agents<\/a> and <a href=\"https:\/\/www.homelight.com\/home-loans\">lenders<\/a>, you should make sure you\u2019ve taken an honest assessment of your income and expenses, so you know just <a href=\"https:\/\/www.homelight.com\/blog\/how-much-house-can-i-afford\/\">how much home you can afford<\/a>. Doing this will help your agent find the best homes for you within a price range that won\u2019t break the bank.<\/p>\n<p>To help ease this part of the process, we\u2019ve compiled a strategy to review your finances and 8 simple rules of thumb that lenders <a href=\"https:\/\/www.moneyunder30.com\/how-much-house-can-you-afford\">often use<\/a> to determine how much they will loan to a buyer.<\/p>\n\n\n\n\n\n<div class=\"geo-cta widget-cta widget-cta--content     widget-cta--dark widget-cta--dark-blue-gradient\">\n    <div class=\"widget-element--content\">\n        <div class=\"widget-element--content-header\">\n            <img decoding=\"async\" alt=\"homelight logo\" class=\"widget-element--logo\" src=\"https:\/\/www.homelight.com\/blog\/wp-content\/themes\/ccprototypev5\/images\/logo-small-cta.png\" width=\"106\" height=\"25\" \/>\n        <\/div>\n        \n                <h3 class=\"cta-headline widget--bold\">Step one: Talk to a few buyer's agents!<\/h3>\n                        <p>Tell us a little bit about your plans (where you&#8217;re looking to buy and when you want to make a purchase) and we&#8217;ll connect you with top-rated buyer&#8217;s agents in your area. It takes only a few minutes, and it&#8217;s free.<\/p>\n        \n                <div class=\"widget-element--buttons\">\n            <a data-type=\"In Content CTA\" href=\"https:\/\/www.homelight.com\/find-agent\/quiz\/buyer?#\/qaas=0\/\" class=\"cta-click-track widget-element--button\">Get Started<\/a>\n        <\/div>\n                    <\/div>\n<\/div>\n\n\n<h2>The costs around buying a house<\/h2>\n<p>When you think about the primary cost of buying a house, the <a href=\"https:\/\/www.homelight.com\/blog\/buyer-what-is-a-down-payment\/\">down payment<\/a> is probably the first thing that comes to mind, and for good reason: It\u2019s definitely going to be the heftiest cost associated with the purchase. That said, you might not need the 20% that you\u2019ve heard you need \u2014 in fact, the <a href=\"https:\/\/www.homelight.com\/blog\/buyer-typical-down-payment-on-a-house\/\">average down payment<\/a> for first-time homebuyers is <a href=\"https:\/\/time.com\/personal-finance\/article\/average-down-payment-on-a-house\/\">6% to 7%<\/a>. Of course, the more you put down, the lower your mortgage payments will be, so it\u2019s important to <a href=\"https:\/\/www.homelight.com\/how-much-house-can-i-afford\">calculate your budget<\/a>.<\/p>\n<p>But the down payment is only the <a href=\"https:\/\/www.homelight.com\/blog\/buyer-hidden-costs-of-buying-a-home\/\">tip of the iceberg<\/a>. In addition, you\u2019ll need to budget for these costs:<\/p>\n<ul>\n<li aria-level=\"1\">The appraisal: <a href=\"https:\/\/www.homelight.com\/blog\/how-to-get-a-home-appraisal\/\">$300 &#8211; $500 on average<\/a><\/li>\n<li aria-level=\"1\">The inspection: <a href=\"https:\/\/www.lawnstarter.com\/blog\/cost\/home-inspection-price\/\">$335 on average<\/a><\/li>\n<li aria-level=\"1\">Closing costs: <a href=\"https:\/\/www.homelight.com\/blog\/who-pays-closing-costs-when-selling-a-house\/\">2%-5% of the home\u2019s purchase price on average<\/a><\/li>\n<\/ul>\n<p>And after the deal closes, you\u2019ll need to factor in taxes and homeowner\u2019s insurance. The <a href=\"https:\/\/www.fool.com\/research\/property-tax-rates-by-state\/\">national average for taxes is $3,126 annually<\/a>, but this cost could be much higher or lower depending on where you live. As for insurance, you\u2019ll probably <a href=\"https:\/\/www.marketwatch.com\/guides\/insurance-services\/average-home-insurance-cost\/#:~:text=Home%20insurance%20costs%20an%20average,best%20price%20when%20shopping%20around.&amp;text=The%20average%20annual%20cost%20of,the%20United%20States%20is%20%242%2C417.10.\">shell out around $2,728<\/a>, but this also can vary greatly based on where you live and depends on a variety of factors \u2014 whether or not your home is in a high-crime area, a flood zone, or has a pool, to name a few.<\/p>\n<div id=\"section--1\" data-toc-header=\"1. Existing monthly costs\" data-toc-type=\"head\"><\/div>\n<h2>1. Existing monthly costs<\/h2>\n<p>Make a list of all your monthly costs in order to understand what percentage of your income is currently devoted to bills. Here are some common bills you should be sure to include if they apply to you:<\/p>\n<ul>\n<li aria-level=\"1\">Credit card debt<\/li>\n<li aria-level=\"1\">Car payments and car insurance<\/li>\n<li aria-level=\"1\">Student loans or tuition payments<\/li>\n<\/ul>\n<p>Before we get into the nitty-gritty, be aware that every lender is going to use a different rule (or set of them).<\/p>\n<p>Top real estate agent <a href=\"https:\/\/www.homelight.com\/agents\/joe-bourland-az-jb426\">Joe Bourland<\/a> in <a href=\"https:\/\/www.homelight.com\/phoenix-az\/top-real-estate-agents\">Phoenix<\/a> (he\u2019s been helping buy and sell homes for 24 years) says that he urges homebuyers to shop around (or use a mortgage broker) because unless you have a credit score of 800 and no debt (which you probably don\u2019t, because you\u2019re human like us), different lenders will use whichever rules they prefer, ultimately giving you several different options to choose from.<\/p>\n<p>Now, let\u2019s get to the rules!<\/p>\n<div id=\"section--2\" data-toc-header=\"2. The 28% rule\" data-toc-type=\"head\"><\/div>\n<h2>2. The 28% rule<\/h2>\n<p>If you\u2019re following this general rule, you shouldn\u2019t <a href=\"https:\/\/www.moneyunder30.com\/how-much-house-can-you-afford\">spend more than 28%<\/a> of your gross income (what you take home before taxes) on your mortgage payment (principal and interest).<\/p>\n<p><span style=\"text-decoration: underline;\">Example:<\/span> If your household income is $100,000, then you can afford to spend around $2,300 on your mortgage principal and interest per month; with these numbers, and assuming you have good credit (a score of 680+) and 6.7% for a down payment, then you should be looking at homes priced around $450,000.<\/p>\n<div id=\"section--3\" data-toc-header=\"3. The 28% \/ 36% rule\" data-toc-type=\"head\"><\/div>\n<h2>3. The 28% \/ 36% rule<\/h2>\n<p>This rule takes the <a href=\"https:\/\/www.fool.com\/the-ascent\/mortgages\/28-36-rule\/\">28% rule one step further<\/a>. It states that your total household debt shouldn\u2019t exceed 36% \u2014 so after you factor in the 28% for your mortgage principal and interest, you only have 8% remaining for the rest of your bills, including car payments, student loans, and credit cards.<\/p>\n<p><span style=\"text-decoration: underline;\">Example:<\/span> If your family has a monthly income of $5,000, they could budget for a $1,000 monthly mortgage payment (principal and interest) and have $800 remaining for their other bills. Assuming these numbers, you\u2019d want to look for homes priced around $165,000.<\/p>\n<p>While not every lender is the same, the 28% \/ 36% rule is a common standard for determining your ability to take on a certain size mortgage.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>How much house you can afford is determined by factors like your credit, debt-to-income ratio, and existing monthly costs.<\/p>\n","protected":false},"author":167,"featured_media":52631,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"cybocfi_hide_featured_image":"","footnotes":""},"categories":[192,620,623],"tags":[],"class_list":["post-14086","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-for-buyers","category-buy-house","category-afford-home"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.0 (Yoast SEO v27.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>How Much House Can I Afford? 10 Rules of Thumb<\/title>\n<meta name=\"description\" content=\"How much house you can afford is determined by factors like your credit, debt-to-income ratio, and existing monthly costs.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.homelight.com\/blog\/buyer-how-much-house-can-i-afford-rule-of-thumb\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"10 Rules of Thumb to Determine How Much House You Can Afford\" \/>\n<meta property=\"og:description\" content=\"How much house you can afford is determined by factors like your credit, debt-to-income ratio, and existing monthly costs.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.homelight.com\/blog\/buyer-how-much-house-can-i-afford-rule-of-thumb\/\" \/>\n<meta property=\"og:site_name\" content=\"HomeLight Blog\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/gohomelight\/\" \/>\n<meta property=\"article:published_time\" content=\"2025-01-15T10:00:24+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-10-29T16:09:07+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/hl-blog.homelight.com\/wp-content\/uploads\/2023\/06\/how-much-house-can-i-afford-rule-of-thumb.png\" \/>\n\t<meta property=\"og:image:width\" content=\"1000\" \/>\n\t<meta property=\"og:image:height\" content=\"563\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"C.E. 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Articles, guides, and advice from top agents all over the U.S.","email":"support@homelight.com","telephone":"(888) 688-0350","legalName":"HomeLight","foundingDate":"2012-01-01","numberOfEmployees":{"@type":"QuantitativeValue","minValue":"201","maxValue":"500"}},{"@type":"Person","@id":"https:\/\/www.homelight.com\/blog\/#\/schema\/person\/c83f17b88086a4827a8c19b0e752add2","name":"C.E. Larusso","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.homelight.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/309523ebcf18cf433da67a9708ebb3c0c8c4ef49353d12299919934569473adf?s=96&d=blank&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/309523ebcf18cf433da67a9708ebb3c0c8c4ef49353d12299919934569473adf?s=96&d=blank&r=g","caption":"C.E. Larusso"},"description":"C.E. Larusso is a writer, editor and environmental activist based in Los Angeles. 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