Mortgage Calculator: How Much Can I Borrow?

Determining how much mortgage I can afford

When buying a home, the question, “How much can I borrow?” should be the second question you ask. The most important consideration is, “How much house can I afford?” That’s because even with all the angst involved in applying for and being approved for a home loan, lenders are often inclined to loan you more money than you expect.

That’s a surprising — and important — reality.

As much as you want to buy a home, lenders (likely) want to loan you money. And the bigger the loan, the happier they are. You’ll know why when you see the estimate of the interest you’ll pay over the life of the loan. It’s a really big number. But if you know how much home you can afford, of course, you’ll want to learn how much you can borrow.

What mortgage terms are best for me?

Different mortgage terms can have a radical impact on your monthly payments and the overall interest you'll pay. For instance, you may consider:

• How long will I live in this home? That can greatly impact your decision on whether to choose a 30-year fixed rate loan or a shorter term. The longer term will provide a more affordable monthly payment, but you’ll pay a lot more interest over the long term. A 15-year fixed-rate mortgage will cost you way less interest over the life of the loan, but your monthly payment will be considerably more.

• Should I pursue an adjustable-rate mortgage or a conventional mortgage? If you plan on being in this home for just a few years, a 5-year ARM could be a good option. You’ll enjoy a lower initial interest rate that’s fixed for five years, but the rate changes every six months after that.

How much money do I need to buy a house?

Down payment costs are just the beginning — you’ll also have to account for closing costs and ongoing homeowner expenses, like property taxes and insurance, and you’ll want to budget for maintenance costs.

If you’re putting down less than 20% on the home, you’ll have to pay private mortgage insurance, or PMI. This is often a few hundred dollars per month. Closing costs are typically equal to 2% to 6% of the price of the home, which comes out to thousands (or tens of thousands) of dollars.