House Affordability: How to Know What Home You Can Really Buy

Ever looked at a listing and wondered if you could actually pay for it? You’re not alone. In 2025 mortgage rates sit around 6‑8%, so the math matters more than ever. This guide breaks down the numbers you need, step by step, so you can stop guessing and start planning.

Calculate Your Buying Power

First, look at your gross yearly income. Lenders usually let you borrow up to 4.5 times that amount, but you also have to meet a debt‑to‑income (DTI) ratio. That means all your monthly debts – credit cards, car loans, student loans – plus the new mortgage payment should stay below about 36% of your take‑home pay.

Next, work out the down payment. A 20% deposit keeps you clear of private‑mortgage insurance (PMI) and lowers your monthly bill. If you can’t manage 20%, 10% is still doable, but expect a higher interest rate and PMI costs.

Plug these figures into a simple calculator:

• Annual income × 4.5 = maximum loan amount
• Subtract any existing debt payments
• Add your down payment to get the total house price you can aim for

Practical Tips to Stretch Your Budget

Boost your credit score. A score above 750 usually lands you the best rates. Pay down any high‑interest cards before you apply for a mortgage – even a few points can shave hundreds off your monthly payment.

Save for a larger deposit. Every extra 1% you put down reduces the loan size and cuts interest over the life of the mortgage. Set up an automatic transfer to a dedicated savings account and watch the balance grow.

Explore government schemes. In England, the Help to Buy Equity Loan and Shared Ownership options can lower the amount you need to borrow. Check eligibility early so you don’t miss out.

Consider a shorter loan term. A 25‑year mortgage costs more per month than a 30‑year, but you pay far less interest overall. If you can stretch a bit, you’ll own your home sooner and save big.

Shop around lenders. Some banks offer lower rates for first‑time buyers or for those who set up a current account with them. Use a mortgage broker to compare offers side by side – it’s free and can reveal deals you’d miss on your own.

Finally, keep an eye on ongoing costs. Property taxes, insurance, maintenance, and utility bills add up. A safe rule is to budget an extra 1% of the home price each year for repairs.

By breaking down the numbers, improving your credit, and using the right financing tools, you can turn the “I can’t afford it” feeling into a clear plan. Start with the calculator, set a realistic savings goal, and you’ll know exactly which door to knock on next.