Simple Down Payment Calculator: How much should you put down?
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affordability report
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Home affordability glossary
Annual Income
This is your annual income before taxes, including salary, commission, social security, interest, and more. Your annual income helps determine how much debt you can take on and what you should allocate for a down payment.
Monthly Debts

Your monthly debts are car payments, student loans, and other recurring personal expenses you make monthly payments on. This number doesn’t include credit card balances you pay off in full each month or the new mortgage you’re getting.

Down Payment
A down payment is what you pay upfront and out-of-pocket towards the purchase of your new home with a mortgage. Some lenders offer loans that require as little as 3% down, but as a rule, the higher your down payment, the lower your rate and monthly payment will be. A down payment of 20% or more will start you off with a healthy amount of equity and allow you to avoid additional lender-required expenses, such as mortgage insurance.
Loan Term
The loan term refers to the period of time you’ll be paying off your mortgage if you meet the minimum payment every month. For example, a 30-year fixed mortgage lasts, you guessed it, 30-years. Overall, a loan term affects your monthly payments and the total amount of interest you’ll pay over the life of the loan.
Property Tax
Property taxes vary widely depending on your location. That’s why we factor in where you’re looking to buy a home to help you determine affordability.
Homeowners Insurance
Your lender will require you to purchase homeowners insurance that covers your mortgage in the event that something happens to your home. Depending on where you live, your lender might have specific requirements on how much and what kind of insurance you need to buy.
HOA Fees
If you buy a home in a Homeowners Association, you’re required to pay monthly association fees that cover the maintenance of your community. These fees can run from $100 to $1,000 each month, so make sure you clarify whether you’ll need to pay them before closing on your new home.
How to (Safely) Budget for a House
It’s important to understand the costs associated with buying a home before you start looking at homes for
sale. Many homeowners find themselves surprised by these costs once they’ve purchased a new home. That’s
why we created the Home Affordability Calculator; to arm you with the information you’ll need to make the
best decision for you and your financial situation.
How we calculate home affordability

The first step is figuring out what you can actually afford. You want to look for the perfect backyard and kitchen, but you should also understand what your monthly mortgage payments, property taxes, and home expenses will look like.

Our calculator takes into account your income, debts (ex: car loans, student loans), and the savings you have for the down payment.

Still, even if your monthly payments are consistent, you need to consider your overall savings and how much you can set aside for emergencies. Your down payment and monthly expenses shouldn’t empty your entire bank account. Make sure you have a healthy reserve in liquid assets for life events you can’t plan.

What’s a DTI and the 28/36% rule of thumb

Your debt-to-income ratio (DTI) helps lenders determine whether you’re able to afford a house. They look at your monthly debts (including your mortgage and rent, car, credit card payments, student loans, etc) and divide that number by your monthly gross income.

A healthy DTI can be up to 43%, but the best DTI for you depends on your specific financial circumstances.

Many financial advisors would suggest following the 28/36 principle. This means that your mortgage payments shouldn’t exceed 28% of your pre-tax income, and your total debt shouldn’t be more than 36% of your pre-tax income. By following the 28/36 rule, you can avoid finding yourself underwater with too much debt.

So, let’s say you make around $6,000 per month. Your monthly mortgage payment shouldn’t be over $1,680 and your monthly debt including monthly mortgage shouldn’t exceed $2,160.

Pre-approved vs. Pre-qualified

Getting pre-approved and pre-qualified are two very different things. Determining which is right for you depends on your situation. 

To get pre-qualified, you answer a couple questions by estimating your income, expenses, and a range of your credit score. This step gives you an initial gauge of how much the lender is willing to loan you and how much house you can afford, without affecting your credit score. It usually only takes a few minutes to complete and you don’t need to provide any documentation. Overall, a pre-qualification gives you an estimate on what you can afford.

The pre-approval process, on the other hand, tends to be more involved. You complete a mortgage application and provide at least some financial documentation for your lender to verify, and they will run a formal credit check. A pre-approval is typically stronger than a pre-qualification because the lender has verified some or all of your important financial information. That way, they have a much clearer picture of the amount they can lend you. You’re also in a better bidding position since the seller knows that your lender is willing to make a loan. Read about the differences between pre-qualifications and preapprovals for more tips!

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Interest rates

The interest rate you settle on can make a big difference in how much you’ll pay for your new home. Read more about what factors affect your interest rate and find out what rates you may qualify for

Private mortgage insurance

If you choose a standard conventional loan and you put down less than 20% on your new home, you will likely be required to get Private Mortgage Insurance (PMI). PMI costs vary, but they typically range from 0.5 to 1% of the loan amount annually. That’s in addition to your mortgage payment, property taxes and homeowner’s insurance. Find out more about PMI.

Closing costs and other fees

Closing costs and fees can account for 2 to 5% of the final purchase price of your home. Depending on the mortgage company you choose, you may also have to pay lender fees. Keep these costs in mind as you calculate how much home you can afford.

Frequently Asked Questions

There are four main factors that go into calculating how much you can afford: monthly income, monthly expenses, credit score, and extra savings that can cover closing costs and down payment.
We give you a safe price range that you can comfortably afford based on the information you provide about your savings and expenses. But, make sure you’re also saving up for future life plans, like new additions to family or buying a new car. At HomeLight, we’re dedicated to providing you with the tools to make the home ownership process easy. If you still have questions about whether it’s the right time for you to buy a home, we recommend speaking with a licensed financial advisor who can help you assess if now is the right time for you
You’ll need to consider a couple of things before you can answer this question. Where do you want to live and do you see yourself living in this area for more than four years? What’s the purchase price of the home you’re looking at and do you have enough savings for the down payment? What are the current interest rates and term of the loan? But, the most important question to ask yourself is, are you prepared to take on the full responsibility of homeownership? You need to make sure that you can handle the costs of owning a home, such as property taxes and home maintenance fees in addition to your monthly mortgage payments. Our home affordability calculator can help you figure out what is healthy range for your situation and budget. From there, you can determine whether renting or buying is the safest financial option.
It’s common advice that you should put 20% down on a home.That way, you’ll have more equity in the home right off the bat and you’ll pay less for your mortgage each month. However, there are lending options that go as low as 3.5% (FHA loans) on down payments. How much you should put down depends on your financial situation, income, and credit score. Use our affordability calculator to find out how much you can afford to pay.
Here’s the equation for mortgage payments on fixed-rate loans: Monthly Mortgage Payments = P[r(1+r)^n/((1+r)^n)-1)] P: principal (initial amount borrowed) i: monthly interest rate. Lender typically list interest rates as a yearly figure. So, if the rate this year is 3.5%, divide that by 12 (months per year), and you’ll get: 0.035/12 = 0.002917 n: # of payments you’ll have over the loan term. On a 30-year fixed rate loan, n = 30 years * 12 months per year, which is 360 payments over the loan term.

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