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How Much of a Monthly Home Payment Can I Afford?

We all know that housing prices have risen significantly over the past few years. And many of us have taken on higher monthly payments already. If you’re thinking of moving soon, it can be tricky to decide just how much you can comfortably afford. And that’s true whether you’re renting or buying a home.

Hint: Just because your pre-approval says one number, doesn’t mean that’s the number you’ll feel good about paying each month. We’ll dive into the details in the post below.

What the Experts Have to Say

For many years, it’s been said that we should spend around 30% of our gross income on monthly housing costs, whether that be rent or a mortgage. This rule came to be in the 1960s as a staple for the cost of low-income housing programs.

Which shows it doesn’t have as much science behind it as one would think.

Today, mortgage lenders use Debt-to-Income ratios of 43% or less. But this doesn’t just include your mortgage — it also includes car payments, student loans, credit cards, and any other monthly debt payments you make each month.

And don’t forget — you’ll still be paying utilities, home maintenance, and more on top of this number. And that’s not including your phone bill, groceries, transportation, insurance, etc.

What Payment Do You Feel Comfortable Making?

This is the question that makes the most sense — What payment do you feel comfortable making? Run a few budgets and don’t forget about emergencies or other things that are important to you — the store you prefer to get your groceries from, monthly travel savings, retirement savings, fun money, etc.

To break it down further, try out the following steps to see the exact payment you’ll be comfortable making for your rent or mortgage:

  1. How much money do you need per month to continue working outward your financial goals? Think extra debt payments, savings contributions, investments, etc.
  2. Now, add up your monthly housing-related bills. Don’t forget the Netflix subscription!
  3. How much do you want to spend per day, week, or month on personal expenses? Be sure to count groceries, transportation costs, personal care, dining out, shopping, etc.
  4. Add these up and subtract them from the amount of money that actually hits your bank account each month (your net income). Don’t forget to account for taxes if you’re self-employed!

The number you find will be the amount you’re comfortable spending on rent or mortgage. For mortgages, make sure you consider that your real estate taxes and home insurance will be a part of that number as you browse houses in your price range.

And if you need any help running these numbers, feel free to reach out to our team today. We’re here to help you with your home search in any way that we can!


If you’re interested in learning more about the buying process, download our free Buying Into Brooklyn Ebook. We share a ton of valuable resources to demystify the buying process and help you become a Brooklyn home-owner.

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