How to Determine What Mortgage You Can Afford

One of the most critical questions homebuyers ask is: How do I determine what mortgage I can afford? The answer depends on your current financial comfort level, future goals and overall lifestyle. Here’s a step-by-step approach to finding the right mortgage amount for your situation.

Step 1: Get Pre-Approved for a Mortgage

Before house hunting, the first step is to get pre-approved for a mortgage. This gives you a clear understanding of the maximum amount a lender is willing to offer based on your income, credit score and debt-to-income ratio. However, just because you qualify for a certain amount doesn’t mean you should borrow the full amount. This is where you evaluate if the lender’s maximum offer aligns with what you’re comfortable paying each month.

Step 2: Assess Your Current Housing Costs

Start by asking yourself: How comfortable are you with your current rent or mortgage payment? Are you stretching to make ends meet, or do you have extra room in your budget? If your rent is manageable and allows you to save comfortably, that’s a good baseline for your future mortgage payment.

• If you need to keep your payment the same, look for homes that match your current rent.
• If you’re ready for an increase, decide how much more you can reasonably handle without stress.
• If you feel overburdened now, it may be wise to aim for a mortgage payment that’s lower than your current rent.

Step 3: Think About More Than Just the Mortgage

A mortgage payment isn’t just about principal and interest. It also includes:

• Property taxes (which vary by location)
• Homeowners insurance
• Homeowner association (HOA) fees (if applicable)
• Maintenance and utilities (which may be higher in a house than in an apartment)

Factor in these costs so you don’t end up house-poor.

Step 4: Consider Your Other Financial Goals

Your mortgage should fit into your bigger financial picture. Ask yourself:

• Will I still be able to save for emergencies?
• Can I continue contributing to retirement or investments?
• Will I have enough room in my budget for travel, hobbies and unexpected expenses?

Owning a home is great but not at the expense of financial freedom. If a higher mortgage means cutting back on things that bring you joy, it may not be the right move.

Step 5: Evaluate Your Down Payment

The more you can put down, the lower your monthly mortgage payment will be. If you have a small down payment, be prepared for private mortgage insurance (PMI) and higher monthly costs.

• If you have limited savings, focus on homes within your means to keep payments manageable.
• If you have a larger down payment, you may be able to afford more while keeping your monthly payments reasonable.

Step 6: Picture Your Future

Your home should serve you well for years to come. Consider:

• Are you planning on starting a family or changing jobs?
• Will your income likely increase or stay the same?
• Do you want to live comfortably, or are you okay stretching your budget for the perfect home?

Your future plans should guide your mortgage decision just as much as your current finances.

Final Thoughts

The best mortgage is one that fits comfortably within your budget without compromising your financial well-being. Start with a pre-approval to know your maximum loan amount, then evaluate what feels realistic for your lifestyle and long-term goals.

Need personalized guidance? Let’s talk about your mortgage options today!

Your trusted loan officer, Kristin Fox

Fox-Guidry Team

Senior Vice President & LPO Manager NMLS#378579

Serving All 50 States

210-838-3310 Call/Text

[email protected]

WWW.THEFEDERALSAVINGSBANK.COM/CB/SALENDING

This information is intended for educational purposes only and should not be construed as financial or tax advice. For more information on financial planning or investment advice, consult a registered investment advisor or financial planner. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.