Buying a home is exciting — but one of the first steps is figuring out how much you can comfortably afford and what your monthly mortgage payments will actually look like.

Let's walk through it in simple terms.

How Lenders Calculate How Much You Can Afford

When you apply for a mortgage, lenders look at your debt-to-income ratio (DTI).
This is a measure of how much of your gross monthly income goes toward paying debts.

Most lenders want your DTI (including the new mortgage payment) to stay below about 43–45%, but it can vary depending on the loan type.

👉 Example:
If you make $6,000 per month gross income, your total debts (including your new mortgage) generally should stay under about $2,400–$2,700 per month.

What Goes Into a Monthly Mortgage Payment?

Your monthly payment isn’t just principal and interest.
It usually includes four parts, often called PITI:

• Principal: Paying down the loan amount

• Interest: The cost of borrowing the money

• Taxes: Property taxes (collected monthly and paid annually)

• Insurance: Homeowners insurance (and possibly mortgage insurance)

Depending on your location, property taxes and insurance can really impact your payment — so it’s important to get a full estimate, not just a base loan quote.

How Down Payment and Interest Rates Affect What You Can Afford

Lower down payment = higher loan amount = higher monthly payment.
Higher interest rate = higher monthly payment.

Even a small change in interest rates can move your payment up or down by hundreds of dollars a month.
That’s why it’s smart to lock in your rate when you find the right home and loan.

👉 Pro Tip:
Use a mortgage calculator to get an early rough estimate, but always get a full pre-approval for the most accurate numbers.

Quick Example

Let’s say you’re buying a $350,000 home with:

• 5% down ($17,500)

• 6.5% interest rate

• 30-year fixed loan

Your estimated monthly payment (including taxes and insurance) might be around $2,600–$2,800 depending on location and specifics.

But every situation is different!
Your credit score, debt levels, local taxes, and even HOA fees can change this.

How to Find Your Real Number

The best way to know exactly what you can afford and what your monthly payment would be is to get pre-approved.

A pre-approval looks at:

• Your income

• Your credit

• Your debts

• Your goals

It gives you a realistic price range and a true estimate of your future payments — and it makes shopping for a home way less stressful.

Helpful References:

• Consumer Financial Protection Bureau – How Much Mortgage Can I Afford?

• NerdWallet – Mortgage Calculator

• Investopedia – What Is PITI?