Show Determining how much mortgage I can affordWhen buying a home, the question, “How much can I borrow?” should be the second question you ask. The most important consideration is, “How much house can I afford?” That’s because even with all the angst involved in applying for and being approved for a home loan, lenders are often inclined to loan you more money than you expect. That’s a surprising — and important — reality. As much as you want to buy a home, lenders (likely) want to loan you money. And the bigger the loan, the happier they are. You’ll know why when you see the estimate of the interest you’ll pay over the life of the loan. It’s a really big number. But if you know how much home you can afford, of course, you’ll want to learn how much you can borrow. Getting ready to buy a home? We’ll find you a highly rated lender in just a few minutes. Enter your ZIP code to get started on a personalized lender match. ZIP code What mortgage terms are best for me?Different mortgage terms can have a radical impact on your monthly payments and the overall interest you'll pay. For instance, you may consider:
How much money do I need to buy a house?Down payment costs are just the beginning — you’ll also have to account for closing costs and ongoing homeowner expenses, like property taxes and insurance, and you’ll want to budget for maintenance costs. If you’re putting down less than 20% on the home, you’ll have to pay private mortgage insurance, or PMI. This is often a few hundred dollars per month. Closing costs are typically equal to 2% to 5% of the price of the home, which comes out to thousands (or tens of thousands) of dollars. What mortgage can I afford?It’s not what you can borrow, it’s what you can affordIn some respects, the mortgage lending industry is working against your best interest. If you are deemed a qualified borrower, a lender is prone to approve you for the maximum it believes you can afford. But in some cases, that amount may be too generous. Buying a home always means dealing with big numbers. And the impact on your budget may seem to be a stretch, particularly in the beginning. The challenge is buying a home that meets your current and future needs, without feeling like all of your money is in your home, leaving you without the financial freedom to travel, save for other priorities and have a cash flow cushion. Consider the 28% rule, which states that mortgage payments shouldn’t be more than 28% of your pre-tax monthly income. If you’re not comfortable with nearly a third of your income going toward your mortgage, you’ll want to avoid shopping at the top of your budget. Now that the NerdWallet "How much can I borrow calculator" has given you an idea of your buying power, you may want to gut-check the number with these next steps.
What factors affect the amount you can borrowLenders consider several factors in determining the amount you qualify for, including:
Looking for a mortgage? Get the best rates when lenders compete for your business Answer a few questions and get personalized rate quotes from NerdWallet's top lenders in minutes. ZIP code How can I qualify to borrow more?If you’re disappointed by the "how much can I borrow" results, remember that there are many factors at work. Small improvements in one or more factors can make a substantial difference:
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