News & Tips
How Much House Can I Afford?
Whether you’re buying a house for the first time or seeking one that will better suit your needs, you may be asking yourself: How much house can I afford? We hear this question frequently at Space Coast Credit Union (SCCU)! We’ll walk you through multiple factors to consider to help you estimate a mortgage loan amount and home purchase price with your salary in mind.
How Much House Can I Afford Based on My Salary?
Maybe you’re considering buying a home or actively looking for one. In either case, it’s helpful to know the mortgage loan amount that a financial institution would lend to you.
Mortgage loan amounts depend on numerous factors:
- Your debt-to-income ratio
- How much you can afford for a down payment
- The term (length) of the mortgage
- The interest rate
- Other payments
Let’s walk you through the steps of determining how much house you can afford—the loan amount and total home purchase price—based on your salary.
Step 1: Calculate Your Debt-to-Income Ratio
Your debt-to-income ratio (DTI) is one of the most important factors financial institutions use when determining how much house you can afford based on your salary.
Step 1: First, add all your sources of gross monthly income together (the total before taxes). For example, let’s say the total household yearly salary is $90,000, then divide by 12, to get $7,500.
Step 2: Multiply the number from Step 1 by the maximum DTI ratio requirement of the home loan type that interests you. For some home loans, 45% is the maximum, but it could be up to 56.9% for FHA loans (certain conditions apply). For example, $7,500 x .45 = $3,375.
Step 3: Add up your total monthly debt payments—this includes current rent or mortgage payments, your car payments, credit card payments, student loan payments, and so forth. Let’s say the total amount is $2,000. Your total monthly debt payment should not exceed the number from Step 2.
Step 4: Subtract the number from Step 3 from the amount in Step 2. So, $3,375 - $2,000 = $1,375—which is the maximum monthly mortgage payment based on the DTI requirement.
You can also use our “Debt-to-Income Ratio” calculator. Keep in mind that DTI requirements vary by home loan type and financial institution.
Step 2: Determine your Down Payment Amount
The next step is to determine the amount of your down payment. Don’t forget to put closing costs (see our “Closing Costs” calculator) in that amount. Typically, lenders like to see an 80% loan-to-value ratio, which means a 20% down payment. Making a down payment of 20% of the home’s purchase price will usually mean avoiding paying private mortgage insurance (PMI), but it’s possible to purchase a home with a smaller percentage. Learn more about buying a house with little to no money down in Florida.
We also offer an Affordable Housing Program.
Step 3: Decide On Your Mortgage Term
The next step is to decide on the terms of the mortgage. Using our Compare Two Mortgage Loans calculator, let’s look at two different term scenarios for a $300,000 home with a $15,000 down payment:
- 30-year mortgage: Let’s say you can get a 7% APR* on a 30-year fixed mortgage. The monthly principal and interest payment would be $1,896.11.
- 15-year mortgage: Now, let’s look at a 15-year mortgage at 6.5% APR.* In that case, your monthly principal and interest payment would be $2,482.66.
With a 30-year mortgage under this scenario, the total interest paid would be $397,602.26. With the 15-year scenario, the total interest paid would be $161,877.50—a difference of $235,724.
So, with the longer term, you have more wiggle room in your monthly budget; with the shorter term, you’ll pay less over the life of the loan.
Step 4: Compare Interest Rates of Various Mortgage Lenders
Overall, it’s a good idea to look at interest rates for your desired term and home loan type at various financial institutions. Usually the lower the rate, the more house you can afford.
You’re probably aware of the shifts in mortgage rates. Financial institutions get their funds from “the Fed,” which is our country’s central bank, and that plays a role in the mortgage rates set by the institutions. Other factors affecting mortgage rates include inflation, the overall economy’s growth or shrinkage, and the rate of job creation.
To put interest rates in perspective, 30-year fixed mortgages 18.4% in October 1981 according to Freddie Mac. After that pinnacle, mortgage interest rates steadily declined, reaching a low in early 2021. Since then, rates have been inching up although they’re still much lower than they were at their peak. See all SCCU mortgage rates here.
|Term||Rate "As Low As"||APR* "As Low As"||Example Loan Amount||Example Monthly Payment|
|10 Years - Purchase or Refi||6.375%||6.656%||$200,000||$2,258.26|
|15 Years - Purchase||6.500%||6.700%||$200,000||$1,742.21|
|15 Years - Refinance||6.625%||6.826%||$200,000||$1,755.99|
|20 Years - Purchase or Refi||7.000%||7.163%||$200,000||$1,550.60|
|30 Years - Purchase||7.000%||7.125%||$200,000||$1,330.60|
|30 Years - Refinance||7.125%||7.251%||$200,000||$1,347.44|
HOME LOANS: Rates based on creditworthiness. Mortgage loans are originated by Space Coast Credit Union and are subject to credit approval, verification, and collateral evaluation. Programs, offers, rates, terms, and conditions are subject to change or cancellation without notice. Certain restrictions apply. Taxes and insurance not included; your actual payment obligation will be higher.
These mortgage loan programs constitute first mortgage liens secured by the home and property. Your down payment is determined by the Loan-to-Value ratio. (90% LTV = 10% down payment). Loans exceeding 80% of the appraised value of the home require private mortgage insurance. Member responsible for any funds needed for closing costs (unless member attached a No Closing Costs option to loan) and pre-paid escrow.
Step 5: Estimate Other Payments
Next, you’ll need to consider the amounts for home insurance, property taxes, and monthly Homeowner Association (HOA) dues.
If you’re already a homeowner, then this probably isn’t news to you—but home insurance rates are going up in Florida. In fact, a LexisNexis Risk Solutions analysis shows that home insurance rates in Florida have gone up 57% since 2015 (the national average has been an increase of 21%), which is the most significant boost in all the states. The reasons for this include inflation, which has driven up costs to repair homes (materials and labor); rising interest rates, which also affects borrowing by insurance companies; and an increasing hurricane impact.
So, it’s a good idea to shop around for insurance quotes and ask for insurance provider recommendations from your real estate agent.
The average property tax in Florida will vary by county. Check out the average percentages here. What’s important to know: What’s the approximate amount of property taxes on the home you want to buy, so you can budget for them accordingly?
Homeowner Association (HOA) Fees
While looking for a home, be sure to consider HOA fees. Nearly half of Florida’s homes (45%) come with HOA fees, according to South Florida Agent Magazine. Although the average monthly fee is $389, they can vary widely depending upon the location. HOA fees usually cover community amenity costs.
Step 6: Use Loan Amount Calculator to Answer How Much Can I Afford?
Once you know all the amounts from Step 1-5 above, enter them into our “Loan Amount” calculator to help you estimate the maximum home purchase price you can afford! We also have numerous other convenient and easy-to-use mortgage loan calculators to help you gain the information you need to make the best decisions.
Housing Market Shifts in Florida
Housing market shifts are pretty much out of your control, as they’re connected to the country’s big-scale macroeconomics—and, although you might like to monitor these trends, what matters is the housing situation when you’re ready to buy. Where you buy also matters because market conditions affect certain areas differently. You can learn more about Florida’s real estate market here. So, you can pay attention to what’s going on in the country but also specifically in Florida.
Additional Factors to Consider When Buying a Home
Even if two people are buying homes with similar prices at the same time, and mortgage payment amounts may be the same, other factors can create different scenarios for them.
Budgeting: Will a bigger mortgage payment work for your budget? Or, do you prefer more of a cushion for emergencies? That matters because you’ll be paying for your mortgage for 15 to 30 years, so it’s best to consider an amount you can comfortably afford and take out a mortgage that reflects that.
Future Expenses: Are you planning to have more people live with you in the future, such as children or aging parents? Are you saving for college expenses? That makes a difference in your budgeting, which mortgage loan calculators don’t take into account or any of the ratios that lenders will use when reviewing your mortgage application.
Lifestyle Preferences: Do you like to travel or are you a real homebody? Do you like to entertain in your home or is this something you’ll need to do for your career? Each of these factors makes a significant difference in your home buying planning. Also consider what you’ll need to buy in home furnishings. Do you already have what you require or will you need to include those purchases in your home buying budget?
Home Type: Besides looking at your wants and needs, also consider the home that you’re planning to buy. Is it in move-in ready condition? If so, you might be more willing to have a higher mortgage payment than if the home you’re purchasing needs remodeling to suit your needs. Or, perhaps you know the home has a good chance of accruing equity and want to plan to make renovations to it and sell the home later.
SCCU Offers A Variety of Home Loans
To sum it up, it’s important to calculate the answer to “how much house can I afford” as you plan to buy a home and construct your budget. Plus, plenty of other factors exist, making each home buying experience a truly personalized one. That’s why SCCU offers a wide range of mortgage loan programs: so you can find one that fits your situation. They include:
- No Down Payment Home Loan: This is a quicker path to home ownership, which can be ideal for first time homebuyers, young professionals, people who need to reserve more funds for home renovations, and so forth.
- Conventional Fixed-Rate Mortgages: This is the most common type of mortgage, one where the interest rate remains the same throughout the loan; so does the monthly principal and interest portion of your payment. This may be the perfect option if you plan to stay in your home long term and appreciate a steady payment amount.
- No Closing Costs Mortgage: You can save thousands on your closing costs, allowing you to put more money down on your home or have more for repairs and so forth. This can also be an ideal option if you’re a first time homebuyer as we waive your lender origination fee and cover your typical closing costs.
- Adjustable-Rate Mortgage: Since we know that no loan program suits everyone, we actually have a variety of adjustable-rate mortgages. They can help you to build equity in your home while you pay a lower rate and payment upfront. Our experienced loan officers will gladly explain how the rates and payments can go up or down in the future and help you to pick the best option for your home buying dreams.
- Condo Loans: Ready to live the Florida lifestyle but having problems getting financing? SCCU is here to help you realize your dream of carefree condo life! We’ll help you navigate special requirements: owner-occupancy rules, HOA guidelines, and more.
- FHA Loans: Maybe you’re tired of renting but don’t have a large down payment. Or maybe your credit isn’t the best. SCCU’s FHA loans could be the right option for you as you can finance up to 96.5%16.
- VA Loans: We offer VA home loans with competitive rates and up to 100% loan-to-value financing16. If you’re an active duty service member, veteran, or an eligible family member, we can help get you in your new home more quickly. Also, see all of our Hero Home Loan options here.
- Construction-to-Permanent Loans: Because we know you’ll want to focus your time on planning for your new life in your brand new home, our construction-to-permanent loans only require one application and one closing. Throughout the building process, we’ll draw funds at key points to pay your builder. When your dream home is complete, we’ll work with you to convert to permanent financing that fits your needs the best.
- Jumbo Home Loans: When you’ve worked hard and are ready to go big, we’re here for you with special financing that can allow your dream to become a reality.
SCCU Can Help You Answer: How Much House Can I Afford?
Enjoy no application fees and an exclusive interest rate guarantee18 at SCCU. Feel free to fill out this form or reach out to us if you any questions. We also offer Member Service for the life of the loan. SCCU is the third-largest credit union in Florida. As long as you live or work in any of these 34 counties in Florida, you can become a member of SCCU with a $5 Share Savings deposit and enjoy competitive rates on loans and accounts.