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How Much House Can You Afford?

How Much House Can You Afford?

Buying a home is a big investment. One of the first questions you may ask when starting the process is, "Can I afford a home?" There's a lot to consider before you make the big decision, but you can use this checklist to help you decide if you're ready to buy.

Determining your financial readiness

If you want to purchase a home, it helps to know if you are financially prepared. Here are some crucial things to keep in mind when determining if any areas of your financial preparation might need improvement.

Your credit score can drastically impact your loan options, so it’s important to know what your score is and what lenders are looking for before you buy. Click here to learn more about credit basics.

Did you know?

Many people assume that lenders require a credit score of 700 or higher, but in reality, a score of 620 can often be sufficient for a conventional loan.

Pro tip: A credit score may not be required to make a home purchase. For example, on-time rent payments can help you qualify for a home loan. (Please consult with your lender for more information.)

Your debt-to-income (DTI) ratio compares how much you spend on debt each month against how much money you make monthly (your total monthly gross income). It’s important to understand and accurately calculate your DTI. Click here to learn more about your debt-to-income ratio.

Did you know?

Many new homebuyers mistakenly think lenders are looking for a maximum DTI to be under 40%. However, qualifying buyers can have a DTI as high as 50% for a conventional loan.

There are many upfront costs when it comes to homebuying and homeownership, like insurance, property taxes, maintenance fees, and a down payment. Get smart about homebuying and homeownership costs so you can be prepared for what comes next.

Did you know?

A common misconception is that lenders require a 20% down payment, but you can actually put as little as 3% down for a conventional loan.

If you’re looking to figure out what kind of home is in your price range, check out our mortgage affordability calculator.

When you feel financially ready to begin the process, it might be time to seek out pre-qualification from a lender to get an estimate of how much you’ll be able to borrow.

Go the extra mile with personal preparation

There are steps every prospective homebuyer can take to help prepare them for the road ahead.

Understand the process

No one likes surprises, especially when it comes to buying a home. Take our free online course, Fannie Mae HomeView®, to learn about the steps to homeownership.

Get organized

Preparing the documents you’ll need now can save you a lot of time later. Use our documentation checklist to make sure you didn’t miss anything.

Prioritize

Decide what matters most to you while evaluating homes — location, features, size, etc.

More to explore

Homebuying and Homeownership Costs

Find affordable mortgage options

Learn about the loan options that can make buying a home more affordable, including low down payment programs.

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Homebuying and Homeownership Costs

How to Know If I'm Ready to Buy a Home

Determine if you're ready for homeownership. Learn how to evaluate your credit score, your income in relation to your debt, and other relevant factors.

Learn more

Homebuying and Homeownership Costs

Manage and Monitor Your Credit

Your credit can affect your ability to buy, renovate, or refinance a home. Learn how to improve, manage, and monitor your credit.

Learn more