{"id":108616,"date":"2026-01-26T10:32:27","date_gmt":"2026-01-26T18:32:27","guid":{"rendered":"https:\/\/www.redfin.com\/blog\/?p=108616"},"modified":"2026-01-26T10:32:27","modified_gmt":"2026-01-26T18:32:27","slug":"home-affordability-factors","status":"publish","type":"post","link":"https:\/\/www.redfin.com\/blog\/home-affordability-factors\/","title":{"rendered":"The Main Factors That Determine How Much House You Can Afford"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Figuring out <\/span><a href=\"https:\/\/www.redfin.com\/how-much-house-can-i-afford\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">how much house you can afford<\/span><\/a><span style=\"font-weight: 400;\"> isn\u2019t just about the maximum mortgage a lender approves. While <\/span><a href=\"https:\/\/www.redfin.com\/blog\/mortgage-pre-approval\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">preapproval<\/span><\/a><span style=\"font-weight: 400;\"> sets an upper limit, true affordability depends on how that <\/span><a href=\"https:\/\/www.redfin.com\/mortgage-calculator\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">monthly payment<\/span><\/a><span style=\"font-weight: 400;\"> fits into your overall finances and long-term plans.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A home that looks affordable on paper can still stretch your budget if you don\u2019t account for upfront costs, ongoing expenses, and future changes. That\u2019s why it\u2019s important to look beyond the loan amount and consider the full picture before setting your price range.<\/span><\/p>\n<p><b>Key factors that shape home affordability include:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Your income and employment stability<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Your debt-to-income (DTI) ratio<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Your credit score and borrowing profile<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><a href=\"https:\/\/www.redfin.com\/blog\/types-of-mortgage-loans\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">Loan type<\/span><\/a><span style=\"font-weight: 400;\">, term length, and interest rate<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Upfront cash requirements and ongoing housing costs<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Personal goals, lifestyle needs, and future plans<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Understanding how these pieces work together can help you choose a home price that feels sustainable\u2014not just today, but years down the road.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">How lenders decide what you can afford<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">When you <\/span><a href=\"https:\/\/launchpad.rocketmortgage.com\/rma\" data-wpel-link=\"external\" target=\"_blank\" rel=\"external noopener noreferrer\"><span style=\"font-weight: 400;\">apply for a mortgage<\/span><\/a><span style=\"font-weight: 400;\">, lenders use specific financial guidelines to estimate how much you can reasonably repay each month. Their goal is to limit risk by ensuring your income, debts, and credit history support the loan amount you\u2019re requesting.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">While exact requirements vary by lender and loan program, most decisions are based on the same core factors.<\/span><\/p>\n<table>\n<tbody>\n<tr>\n<td><b>Lender factor<\/b><\/td>\n<td><b>What it measures<\/b><\/td>\n<td><b>Typical guideline range<\/b><\/td>\n<\/tr>\n<tr>\n<td><b>Income<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Your gross monthly earnings and consistency<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Verified, stable income<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Debt-to-income (DTI)<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Share of income used for debt payments<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Often \u2264 43%\u201350% total<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Credit score<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Likelihood of on-time repayment<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Varies by loan type<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Loan type &amp; term<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Length and structure of the mortgage<\/span><\/td>\n<td><span style=\"font-weight: 400;\">15- or 30-year common<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Interest rate<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Cost of borrowing<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Market-dependent<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><span style=\"font-weight: 400;\">These criteria determine your <\/span><b>maximum<\/b><span style=\"font-weight: 400;\"> loan approval\u2014not necessarily the payment that\u2019s most comfortable for your lifestyle.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Your income and employment stability<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Income is the foundation of affordability. Lenders focus on your <\/span><b>gross monthly income<\/b><span style=\"font-weight: 400;\"> (before taxes) and how reliably you earn it.<\/span><\/p>\n<p><b>They typically look at:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Salary or hourly wages<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Self-employment or contract income<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Bonus, commission, or overtime income (often averaged over time)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Length and <\/span><a href=\"https:\/\/www.redfin.com\/blog\/getting-mortgage-with-new-job\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">consistency of employment<\/span><\/a><\/li>\n<\/ul>\n<p><b>Gross vs. net income<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><i><span style=\"font-weight: 400;\">Gross income<\/span><\/i><span style=\"font-weight: 400;\"> is used for loan qualification.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><i><span style=\"font-weight: 400;\">Net income<\/span><\/i><span style=\"font-weight: 400;\"> (what you take home) matters more for personal budgeting.<\/span><\/li>\n<\/ul>\n<p><b>Quick example:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Gross monthly income: $6,500<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Lender may allow housing costs up to ~30%<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Estimated maximum housing payment: ~$1,950<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Even if you qualify for that amount, your net income and other expenses may suggest a lower, more comfortable target.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Debt-to-income ratio (DTI)<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Your <\/span><a href=\"https:\/\/www.redfin.com\/guides\/buy\/calculate-debt-to-income-ratio\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">debt-to-income ratio<\/span><\/a><span style=\"font-weight: 400;\"> shows how much of your income goes toward monthly debt payments. It\u2019s one of the most important numbers lenders use to assess affordability. Most lenders look for a DTI of 43% or lower, though some loan programs allow higher ratios if you have strong credit, solid savings, or other compensating factors.<\/span><\/p>\n<p><b>DTI formula:<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Total monthly debt payments \u00f7 Gross monthly income = DTI<\/span><\/p>\n<p><b>Debt payments typically include:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Mortgage (or proposed mortgage)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Auto loans<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Student loans<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Credit card minimums<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Personal loans<\/span><\/li>\n<\/ul>\n<p><b>Common target thresholds:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Housing costs alone: ~28%\u201331% of gross income<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Total debt (including housing): often \u2264 43%, though some programs allow higher<\/span><\/li>\n<\/ul>\n<p><b>Mini example:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Monthly debts: $2,400<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Gross monthly income: $6,000<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">DTI = 40%<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">A lower DTI generally means more flexibility and a wider range of loan options.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Credit score\u00a0<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Your credit score affects how much you can afford in two major ways: interest rates and loan eligibility.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In general, borrowers with higher credit scores qualify for lower interest rates, lower monthly payments, and more loan options. Borrowers with lower scores usually face higher rates, higher payments, and may be limited in the types or sizes of loans they can get<\/span><b>.<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Even a small rate difference can change your affordability by tens of thousands of dollars over the life of a loan.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Loan types, terms, and interest rates<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The structure of your mortgage plays a major role in what you can afford month to month\u2014and over time.<\/span><\/p>\n<p><b>Key differences include:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Fixed-rate vs. adjustable-rate mortgages (ARMs)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">15-year vs. 30-year loan terms<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Current interest rate environment<\/span><\/li>\n<\/ul>\n<table>\n<tbody>\n<tr>\n<td><b>Loan scenario<\/b><\/td>\n<td><b>Monthly payment<\/b><\/td>\n<td><b>Long-term cost<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">30-year fixed, lower payment<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Lower<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Higher total interest<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">15-year fixed, higher payment<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Higher<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Lower total interest<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">ARM, lower initial rate<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Lower at first<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Payment may rise later<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><span style=\"font-weight: 400;\">Shorter terms and higher rates reduce how much house you can afford monthly, while longer terms and lower rates increase purchasing power\u2014but often at a higher total cost.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Understanding these tradeoffs helps you choose a loan that aligns with both your budget and long-term goals.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Upfront costs that affect how much house you can afford<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Affordability isn\u2019t just about your <\/span><a href=\"https:\/\/www.redfin.com\/mortgage-calculator\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">monthly mortgage payment<\/span><\/a><span style=\"font-weight: 400;\">. The amount of cash you have available before closing plays a major role in determining what price range is realistic\u2014and how comfortable you\u2019ll feel after you move in.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Before buying a home, most buyers need funds for three main upfront cost categories:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Down payment:<\/b><span style=\"font-weight: 400;\"> The portion of the home\u2019s price you pay upfront<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Closing costs:<\/b><span style=\"font-weight: 400;\"> Fees required to finalize the purchase and loan<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Cash reserves:<\/b><span style=\"font-weight: 400;\"> Savings set aside after closing for emergencies and ongoing expenses<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">These costs can limit your maximum purchase price even if your income supports a higher monthly payment.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Down payment size\u00a0<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Your <\/span><a href=\"https:\/\/www.redfin.com\/blog\/how-much-down-payment-for-a-house\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">down payment<\/span><\/a><span style=\"font-weight: 400;\"> directly affects how much you borrow, your monthly payment, and whether you\u2019ll need private mortgage insurance (PMI).<\/span><\/p>\n<p><b>In general, a larger down payment can:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Reduce your loan amount and monthly payment<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Lower or <\/span><a href=\"https:\/\/www.redfin.com\/blog\/how-to-remove-pmi-from-mortgage\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">eliminate PMI costs<\/span><\/a><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Improve your loan terms and interest rate options<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Make your offer more competitive in tight housing markets<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Smaller down payments may help you buy sooner but often come with higher monthly costs.<\/span><\/p>\n<p><b>Example: How down payment size affects monthly costs on a $400,000 home<\/b><\/p>\n<p><i><span style=\"font-weight: 400;\">Illustrative example assuming a 30-year fixed mortgage at 5% interest with a conventional loan. Actual rates, loan terms, PMI costs, and monthly payments vary by borrower, market conditions, and lender. This example is for comparison purposes only and excludes property taxes and homeowners insurance.<\/span><\/i><\/p>\n<p><b>5% down ($20,000)<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Loan amount: <\/span><b>$380,000<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Estimated monthly principal &amp; interest: <\/span><b>~$2,040<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Estimated monthly PMI: <\/span><b>~$190<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Estimated total monthly cost:<\/b> <b>~$2,230<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">PMI typically required<\/span><\/li>\n<\/ul>\n<p><b>10% down ($40,000)<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Loan amount: <\/span><b>$360,000<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Estimated monthly principal &amp; interest: <\/span><b>~$1,930<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Estimated monthly PMI: <\/span><b>~$135<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Estimated total monthly cost:<\/b> <b>~$2,065<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">PMI still usually required<\/span><\/li>\n<\/ul>\n<p><b>20% down ($80,000)<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Loan amount: <\/span><b>$320,000<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Estimated monthly principal &amp; interest: <\/span><b>~$1,720<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">PMI: <\/span><b>$0<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Estimated total monthly cost:<\/b> <b>~$1,720<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">PMI typically not required<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">At a 5% interest rate, increasing the down payment from 5% to 20% lowers estimated monthly costs by $500+ per month and removes PMI\u2014demonstrating how upfront cash can materially improve long-term affordability.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To see how changes in interest rates, down payment size, taxes, and insurance affect your own numbers, using a <\/span><a href=\"https:\/\/www.redfin.com\/mortgage-calculator\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">home affordability calculator<\/span><\/a><span style=\"font-weight: 400;\"> can help you model different scenarios based on your income and budget.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Closing costs and fees<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">In addition to your down payment, you\u2019ll need to budget for <\/span><a href=\"https:\/\/www.redfin.com\/blog\/what-are-closing-costs\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">closing costs<\/span><\/a><span style=\"font-weight: 400;\"> and post-closing savings to avoid financial strain after purchase.<\/span><\/p>\n<p><b>Common closing costs include:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Loan origination and underwriting fees<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Appraisal and credit report fees<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Title insurance and escrow fees<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Recording and transfer fees<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Prepaid property taxes and homeowners insurance<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Closing costs typically range from <\/span><b>2% to 5% of the home\u2019s purchase price<\/b><span style=\"font-weight: 400;\">, depending on location, loan type, and transaction details.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Cash reserves and savings<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Many lenders also prefer\u2014or require\u2014buyers to have additional savings after closing. These funds can help cover:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Emergency repairs or maintenance<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Moving expenses and initial setup costs<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Temporary income disruptions<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">A common guideline is to keep <\/span><b>three to six months of living expenses<\/b><span style=\"font-weight: 400;\"> in reserve, though needs vary based on job stability and personal comfort level.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Accounting for all three upfront cost categories can help you choose a home price that\u2019s not only affordable to buy\u2014but sustainable to own.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Ongoing homeownership expenses beyond the mortgage<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Your mortgage payment is only one part of what you\u2019ll pay each month as a homeowner. To keep a home affordable long term, it\u2019s important to account for recurring costs that can vary widely by location, property type, and loan structure.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When evaluating affordability, many buyers find it helpful to think in terms of a <\/span><b>total monthly housing cost<\/b><span style=\"font-weight: 400;\">, not just principal and interest.<\/span><\/p>\n<table>\n<tbody>\n<tr>\n<td><b>Monthly cost\u00a0<\/b><\/td>\n<td><b>What it covers<\/b><\/td>\n<\/tr>\n<tr>\n<td><b>Principal &amp; interest<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Your base mortgage payment<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Property taxes<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Local and state taxes tied to home value<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Homeowners insurance<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Coverage for the structure and liability<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>HOA dues<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Required fees for shared communities (if applicable)<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>PMI<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Insurance required with low down payments (if applicable)<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Utilities<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Electricity, gas, water, trash, internet<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Maintenance &amp; repairs<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Ongoing upkeep and unexpected fixes<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><span style=\"font-weight: 400;\">Stacking these costs together gives a more realistic view of what owning the home will actually cost month to month.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Property taxes, insurance, and HOA fees<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">These housing expenses are highly location-dependent and can cause two similarly priced homes to have very different monthly costs.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Property taxes<\/b><b><br \/>\n<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Based on local tax rates and assessed home value<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Often collected monthly through <\/span><a href=\"https:\/\/www.redfin.com\/blog\/what-is-escrow\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">escrow<\/span><\/a><span style=\"font-weight: 400;\"> with your mortgage payment<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Can increase over time as values or tax rates change<\/span><span style=\"font-weight: 400;\">\n<p><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Homeowners insurance<\/b><b><br \/>\n<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Covers damage, liability, and certain losses<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Commonly paid through escrow, though some owners pay separately<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Costs vary by location, home size, and risk factors<\/span><span style=\"font-weight: 400;\">\n<p><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>HOA fees<\/b><b><br \/>\n<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Required in many condos, townhomes, and planned communities<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Usually paid monthly or quarterly, outside of escrow<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">May cover amenities, exterior maintenance, or shared services<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Because these costs are ongoing, they should be included in your affordability calculations from the start\u2014not treated as afterthoughts.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Private mortgage insurance (PMI)<\/span><\/h3>\n<p><a href=\"https:\/\/www.redfin.com\/blog\/what-is-pmi-insurance\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">Private mortgage insurance<\/span><\/a><span style=\"font-weight: 400;\"> is typically required when you put down less than 20% on a conventional loan. PMI protects the lender, but the cost is paid by the borrower and increases your monthly housing payment.<\/span><\/p>\n<p><b>What to know about PMI:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Often costs <\/span><b>0.3% to 1.5% of the loan amount per year<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Usually paid monthly as part of your mortgage payment<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Can often be removed once you reach sufficient equity<\/span><\/li>\n<\/ul>\n<p><b>Quick PMI example:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Loan amount: $350,000<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Annual PMI rate: 0.8%<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Estimated monthly PMI: ~$230<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">That added expense can meaningfully affect affordability, especially in the early years of homeownership.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Utilities, maintenance, and repairs<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Even after closing, ongoing non-mortgage expenses can strain a budget if they aren\u2019t planned for in advance.<\/span><\/p>\n<p><b>Common utility costs include:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Electricity and gas<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Water, sewer, and trash<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Internet and streaming services<\/span><\/li>\n<\/ul>\n<p><b>Maintenance and repair budgeting guidelines:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>1%\u20133% of the home\u2019s value per year<\/b><span style=\"font-weight: 400;\"> for maintenance<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Or roughly <\/span><b>$1\u2013$3 per square foot annually<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Older homes often require higher upkeep budgets<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Setting aside money each month for maintenance and repairs can help prevent surprise expenses and reduce the risk of becoming \u201chouse poor.\u201d<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Personal goals, lifestyle, and future changes<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Even if a home fits your budget today, it may not align with where you want your life\u2014and finances\u2014to be in the years ahead. That\u2019s why affordability isn\u2019t just a math problem. It\u2019s also a lifestyle decision.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Before settling on a price range, it can help to step back and ask how a higher or lower housing payment supports your broader goals.<\/span><\/p>\n<p><b>Questions to consider as you set your comfort zone:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">How much monthly flexibility do you want after housing costs?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Are there savings or investing goals you don\u2019t want to pause?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Do you value stability, or flexibility to move or change jobs?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">How comfortable are you with fixed versus variable expenses?<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Thinking through these questions can help ensure your home supports your life\u2014not the other way around.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Balancing a home purchase with other financial priorities<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">A higher housing payment often means making tradeoffs elsewhere in your budget. While some buyers are comfortable prioritizing housing, others prefer to leave room for additional goals.<\/span><\/p>\n<p><b>Common tradeoff scenarios include:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Higher mortgage payment<\/b><b><br \/>\n<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Slower retirement or investment contributions<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Less discretionary spending for travel or hobbies<\/span><span style=\"font-weight: 400;\">\n<p><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Lower mortgage payment<\/b><b><br \/>\n<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">More room to save, invest, or pay down debt<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Greater flexibility for unexpected expenses<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">For example, choosing a home that costs $400 less per month could free up nearly $5,000 per year for retirement contributions, debt payoff, or savings. Viewing affordability in annual terms can make these tradeoffs easier to evaluate.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Planning for income or family changes<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Affordability should account not only for your current income, but also for realistic changes that could occur over the next five to ten years.<\/span><\/p>\n<p><b>Common changes to stress-test your budget against include:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A job change, career pivot, or income fluctuation<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">One income temporarily or permanently decreasing<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Increased expenses tied to life changes or caregiving<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Rising costs for healthcare, insurance, or education<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">A helpful approach is to ask whether you could still afford your home if your income dropped or expenses increased for a period of time. Buying below your maximum approval can provide a financial buffer if circumstances change.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Rules of thumb and simple formulas to estimate affordability<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Rules of thumb can be helpful when you want a quick estimate of how much house you might afford before running detailed numbers. While they don\u2019t replace a full budget, these guidelines can provide useful guardrails as you narrow your price range.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Below are some of the most commonly used affordability benchmarks and how to apply them in practice.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Housing and total debt percentage guidelines<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">One widely referenced guideline suggests keeping total housing costs within a certain percentage of your gross income to maintain financial balance.<\/span><\/p>\n<p><b>Common benchmarks include:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Housing costs:<\/b><span style=\"font-weight: 400;\"> About <\/span><b>28%\u201330%<\/b><span style=\"font-weight: 400;\"> of gross monthly income<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Total debt (housing + other debts):<\/b><span style=\"font-weight: 400;\"> Often <\/span><b>36%\u201343%<\/b><span style=\"font-weight: 400;\"> of gross income<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Staying under these ranges can help preserve room for savings, emergencies, and other financial goals.<\/span><\/p>\n<p><b>Simple example conversions:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Gross monthly income: $6,000<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">30% housing guideline: ~$1,800\/month<\/span><span style=\"font-weight: 400;\">\n<p><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Gross monthly income: $8,000<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">30% housing guideline: ~$2,400\/month<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">These figures typically include principal, interest, taxes, insurance, and any HOA or PMI costs\u2014not just the base mortgage payment.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Understanding popular rules like 3-3-3 and 3-7-3<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Shorthand rules like 3-3-3 and 3-7-3 offer quick ways to think about affordability, especially for <\/span><a href=\"https:\/\/www.redfin.com\/guides\/buy\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">first-time buyers<\/span><\/a><span style=\"font-weight: 400;\">. They\u2019re meant to simplify decision-making, not define strict limits.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>3-3-3 rule<\/b><b><br \/>\n<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Spend no more than <\/span><b>3\u00d7 your annual income<\/b><span style=\"font-weight: 400;\"> on the home price<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Plan for a <\/span><b>3% down payment<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Keep monthly housing costs near <\/span><b>30% of income<\/b><b>\n<p><\/b><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>3-7-3 rule<\/b><b><br \/>\n<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Home price around <\/span><b>3\u00d7 annual income<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Down payment of <\/span><b>7%<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Aim for a <\/span><b>30-year mortgage<\/b><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">These rules help balance price, down payment, and monthly affordability, but they don\u2019t account for differences in interest rates, taxes, HOA fees, or personal financial priorities. Using them alongside a detailed budget provides a more accurate picture.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">The bottom line<\/span><\/h2>\n<p><a href=\"https:\/\/www.redfin.com\/how-much-house-can-i-afford\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">How much house you can afford<\/span><\/a><span style=\"font-weight: 400;\"> depends on more than a lender\u2019s approval number. Income, debt, credit, upfront cash, ongoing expenses, and personal goals all play a role in setting a price range that feels manageable over time.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">By building a realistic budget, accounting for full housing costs, and stress-testing your plans against future changes, you can choose a home that supports both your finances and your lifestyle. Using affordability calculators and speaking with a trusted professional can also help you refine your range before <\/span><a href=\"https:\/\/www.redfin.com\/blog\/making-an-offer-on-a-house\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">making an offer<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Learn which financial and lifestyle factors to weigh when deciding how much house you can afford, from income and DTI to taxes and repairs. Get clear steps now.<\/p>\n","protected":false},"author":562,"featured_media":105300,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[34277],"tags":[34642],"coauthors":[34346],"class_list":["post-108616","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-mortgage"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.7 (Yoast SEO v27.7) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Key Factors That Determine How Much House You Can Afford - Redfin<\/title>\n<meta name=\"description\" content=\"Learn which financial and lifestyle factors to weigh when deciding how much house you can afford, from income and DTI to taxes and repairs.\" \/>\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.redfin.com\/blog\/home-affordability-factors\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Main Factors That Determine How Much House You Can Afford\" \/>\n<meta property=\"og:description\" content=\"Learn which financial and lifestyle factors to weigh when deciding how much house you can afford, from income and DTI to taxes and repairs.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.redfin.com\/blog\/home-affordability-factors\/\" \/>\n<meta property=\"og:site_name\" content=\"Redfin | Real Estate Tips for Home Buying, Selling &amp; 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