How Much House Can You Really Afford?

Figure out what monthly mortgage payment will fit your budget before you start shopping.
Kate Wood
By Kate Wood 
Updated
Edited by Mary Makarushka Reviewed by Michelle Blackford

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It's more than tempting to dive right in and start favoriting houses on real estate listing sites, but it's not worth falling in love — or even lust — if the property's way beyond your budget. But how do you determine your price range? You could reach out to mortgage lenders and see what they'd be willing to let you borrow, but you're likely better off working backward from the monthly mortgage payment. Here's why.

» MORE: Try NerdWallet's home affordability calculator

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Why start with the monthly payment?

Loan officers often offer to start by looking at the maximum mortgage amount you could qualify for, based primarily on your credit score and debt-to-income ratio. While it can feel pretty cool to see a big number, maxing out what a lender will offer could leave you house poor. That would mean too much of your income would go toward housing, leaving you scraping to pay your other bills, let alone save for retirement, travel or have fun.

Before you start talking to lenders, you should have a strong sense of your current financial situation. That includes money coming in, money going out and money goals. For example, if you want to start a family or plan to increase your contributions to your 401(k), include that extra spending even if it's not part of your current budget. If you're considering a career change or going back to school down the line, think about how that would affect your household income. Use those numbers to figure out what mortgage payment amount would be comfortable for you.

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Mortgage loans from our partners

Rocket Mortgage - PURCHASE logo
Check Rate

on Rocket Mortgage

Rocket Mortgage

5.0

NerdWallet rating 
Rocket Mortgage - PURCHASE logo

5.0

NerdWallet rating 
Min. credit score 
580

Min. down payment 
3.5%

Check Rate

on Rocket Mortgage

Better - PURCHASE logo
Check Rate

on Better

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4.5

NerdWallet rating 
Better - PURCHASE logo

4.5

NerdWallet rating 
Min. credit score 
620

Min. down payment 
3%

Check Rate

on Better

NBKC - PURCHASE logo
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on NBKC

NBKC

4.5

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4.5

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Min. credit score 
620

Min. down payment 
3%

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