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How Much House Can I Afford?


Are you interested in purchasing a house and want to know what you can afford? Many Chicago area and Naperville house hunters often ask, "how much mortgage can I afford?" There are several things to consider, such as your household income, monthly debts (student loan payments, car payments, etc.), and how much you have for a down payment. It's essential to have a certain level of comfort with knowing your monthly payments. Learn more below, and don't hesitate to contact our team for more information.

How Much Home Can I Afford?

How much mortgage can I afford? To know what you can afford, you want to start with your debt-to-income ratio and how it impacts your affordability. Your DTI ratio is how banks decide how much mortgage you can afford to determine how much you can afford to borrow. The bank compares your total monthly debts (mortgage payments, insurance, and property tax payments) to your monthly pre-tax income. A high credit score allows you to qualify for a higher ratio, but housing expenses shouldn't exceed 28% of your monthly income.


Let's run the numbers. If your monthly mortgage payment, including insurance and taxes, is $1,260 a month and you have a monthly income of $4,500 before taxes (1260/4500 - 0.28), your DTI is 28%. You can also take your monthly income and multiply it by 0.28 (4500 x 0.28 - $1,260).

Additional Factors That Determine What You Can Afford

In addition to what we mentioned above, some factors help figure out "how much home I can afford." 


Income — Money that you receive regularly, which would be your salary or any income from investments.

Cash Reserves — This is how much you can make as a down payment and cover closing costs. 

Debt & Expenses — These are monthly obligations, such as credit card payments, car payments, student loans, groceries, insurance, utilities, etc.

Credit Profile —  Your credit score and amount of debt determine what you can borrow. 

Learn More About Your Options With Us!

We've answered, "how much mortgage can I afford?" Our team is here if you have more questions! We offer a plethora of online resources and articles to help with your mortgage rates, investing, estate, or insurance needs.