Understanding Your Mortgage
Before you start house hunting, it's crucial to understand how mortgages work. A mortgage is essentially a loan from a bank or lender that helps you purchase a home. You'll make monthly payments that include both principal (the amount you borrowed) and interest (the cost of borrowing money).
Key Mortgage Terms You Need to Know
The amount of money you borrow from the lender to purchase your home. This doesn't include interest or fees.
The percentage of the loan amount you pay annually as interest. This is the "cost" of borrowing money.
The length of time you have to repay the loan, typically 15 or 30 years. Longer terms mean lower monthly payments but more total interest.
The upfront payment you make when purchasing a home, typically 3-20% of the home's purchase price.
How Much House Can You Afford?
Use our interactive calculator to determine your home buying budget. This tool considers your income, debts, down payment, and other factors to give you a realistic affordability range.
Credit cards, car loans, student loans, etc.
Understanding Your Affordability Results
The calculator above provides three key affordability ranges based on different lending guidelines. Here's what each means:
Conservative Range (Recommended for First-Time Buyers)
This is the safest option, typically allowing you to spend 25-28% of your gross monthly income on housing. It provides a buffer for unexpected expenses and interest rate changes.
FHA/Standard Range
This follows standard lending guidelines (28-36% of income for housing). It's more aggressive but still reasonable for most buyers with stable incomes.
Aggressive Range (Use with Caution)
This pushes the limits of what lenders typically allow (up to 43% of income). While possible, it leaves little room for other expenses and can be risky.
Ready for the Next Steps?
Now that you understand the basics and know your budget, here are the key actions to take next in your homebuying journey.
Continue Your Learning Journey
Explore more detailed guides to deepen your understanding of homebuying.
Educational Purpose Only: This guide is for educational purposes only and does not constitute financial advice. Mortgage terms, rates, and requirements vary by lender and location. Consult with qualified professionals for personalized guidance.