How much house can I afford?

Use these tips to determine your home budget

Buying a house is a major financial decision, and it’s important to know how much house you can afford before you start your search. Here are some tips to help you determine your budget:

Calculate Your Debt-to-Income Ratio

Lenders use your debt-to-income ratio (DTI) to determine how much mortgage you can afford. Your DTI is the percentage of your monthly income that goes toward debt payments, including your mortgage, credit card bills, and other loans. Most lenders prefer a DTI of 36% or lower.

To calculate your DTI, add up all of your monthly debt payments and divide by your gross monthly income. Multiply the result by 100 to get your DTI percentage.

Determine Your Down Payment

Your down payment is the amount of money you pay upfront when you buy a house. Most lenders require a down payment of at least 20% of the purchase price to avoid private mortgage insurance (PMI). However, some lenders may allow a lower down payment.

Consider Your Credit Score

Your credit score is a major factor in determining how much house you can afford. A higher credit score can help you qualify for a lower interest rate, which can lower your monthly mortgage payment. If your credit score needs improvement, consider using a credit-building tool like Kikoff to increase your score before applying for a mortgage.

Kikoff: A Step to Increase Your Credit Score

Kikoff is a great tool to use if you’re looking to improve your credit score before buying a house. Kikoff offers credit-building accounts that can help you establish a strong credit history and improve your score over time.

By making on-time payments and demonstrating responsible credit management, you can increase your credit score and qualify for a better interest rate on your mortgage. With a lower interest rate, you can afford to borrow more money without increasing your monthly mortgage payment.

Final Thoughts

Determining how much house you can afford is an important step in the homebuying process. By calculating your DTI, determining your down payment, and considering your credit score, you can get a better idea of how much house you can afford. Using a credit-building tool like Kikoff can also help you improve your credit score and qualify for a better mortgage. By following these tips, you’ll be well on your way to finding the perfect home that fits your budget.

The information provided in this blog post is meant for informational purposes only and does not constitute financial advice. Kikoff Inc. is a financial technology company and not a bank. The Kikoff Secured Credit Card is issued by Coastal Community Bank, Member FDIC. Terms and conditions apply & individual results may vary. Make consistent on-time payments to maximize credit building potential.  Credit factors outside Kikoff, like other account balances or delinquencies, can have an impact on credit building progress.  Subject to approval via identity verifications and subject to terms and conditions. Kikoff Credit Account reported line of credit intended exclusively for credit building purposes & can be used to finance the purchase of monthly Credit Service plans and/or digital educational material via the Kikoff Store. For more information, visit our Terms and Conditions and Privacy Policy. We report to the major credit bureaus: Equifax, Experian, and TransUnion. Features, tradelines, bureau reporting, & pricing may vary depending on plan purchased. This post may contain marketing messages and advertisements in compliance with the CAN-SPAM Act. Please refer to our Secured Card and Credit Account Terms for detailed product disclaimers.

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Credit utilization, or the amount of credit used, greatly impacts your score—keeping it below 30% is ideal. Avoid myths like carrying balances to build credit faster. Pay in full and focus on strategies like the Snowball or Avalanche methods to manage debt effectively and improve financial health.