# Think You Can Afford That House? Run These Numbers First
Before making an offer on a home, you need to calculate your actual affordability. A mortgage payment represents only a fraction of homeownership costs.
Start with the mortgage itself. Banks typically lend up to 28% of your gross monthly income toward housing costs. If you earn $5,000 monthly, that's roughly $1,400. But this is just a baseline. Your debt-to-income ratio also matters. Most lenders cap total monthly debt at 36% to 43% of gross income, including your mortgage, car loans, credit cards, and student loans.
Property taxes vary wildly by location. In New Jersey, homeowners pay roughly 2% of property value annually. In Alabama, that drops to 0.4%. Request a tax assessment from the county assessor before buying. Insurance premiums typically run $800 to $1,500 yearly for standard homeowners policies. Get multiple quotes from Allstate, State Farm, and GEICO.
Homeowners association fees, if applicable, add $200 to $500 monthly in many communities. Read the CC&Rs (Covenants, Conditions, and Restrictions) carefully.
Maintenance costs catch many buyers off guard. Home inspectors recommend budgeting 1% to 2% of your home's purchase price annually for repairs and upkeep. A $300,000 home requires $3,000 to $6,000 yearly for maintenance.
Utilities, water, sewer, and trash services typically cost $200 to $400 monthly, depending on climate and home size.
Create a spreadsheet. List your mortgage payment, property tax, insurance, HOA fees, maintenance reserves, and utilities. Add these together. If the total exceeds 28% to 30% of your