What nobody tells you
- Lenders approve based on debt-to-income ratios that leave little room for saving, travel, kids, or a job loss — approved doesn't mean comfortable.
- Closing costs typically run 2–5% of the purchase price on top of the down payment, and are frequently underestimated by first-time buyers.
- Ongoing maintenance on a home commonly runs 1–2% of the home's value per year, and it doesn't happen on a predictable schedule.
The basics
- Debt-to-income ratio (DTI) compares your monthly debt payments to your gross monthly income; lenders typically cap total DTI including the new mortgage around 36–43%, though limits vary.
- A down payment reduces your loan size and monthly payment; 20% avoids private mortgage insurance in the US but isn't required to buy.
- Total housing cost includes principal, interest, taxes, insurance, HOA fees if any, and maintenance — not just the mortgage payment quoted by a lender.
The framework
The three affordability tests
Run all three before deciding — passing only the first (lender approval) is not the same as passing all three.
- 01
Can I get approved? (Lender's DTI-based math.)
- 02
Can I comfortably pay it monthly alongside my other goals, without lifestyle strain? (Your own budget math.)
- 03
Can I survive an income shock or a large unexpected repair without derailing? (Stress-test math.)
The playbook
The mistakes — what people get wrong
- Stretching to the top of your lender's approved amount instead of your own comfortable ceiling.
- Forgetting property taxes can rise over time, sometimes significantly, independent of your fixed mortgage rate.
- Buying with a partner without agreeing in writing on ownership split and what happens to the house if the relationship ends.
Ask yourself
- Could I still hit my other financial goals (retirement, emergency fund) with this monthly payment?
- Have I budgeted for closing costs and moving costs, not just the down payment?
- Could I cover this mortgage for several months if my income stopped tomorrow?
Go deeper
- Tool
An affordability calculator that includes taxes and insurance
More realistic than a simple mortgage payment calculator alone.
- Practice
A 'practice payment' month
Set aside the difference between your rent and the projected mortgage payment before you buy, to feel the real cash flow impact.
- Professional
A fee-only financial planner
Can stress-test a home purchase against your full financial picture without a sales incentive.
General educational information, not legal, tax, medical, or financial advice. Rules vary by country and change over time — verify with a qualified professional before acting.