Chase Mortgage Guide

Know how much home you can comfortably afford

By Chase | Published: Nov 13, 2013

For most people, the home you can afford to buy ultimately depends on how much money a bank will lend you. However, you must also carefully consider your current and future expenses.

Get a ballpark sense of what you can borrow

Use a calculator to get a general idea of how much you can borrow based on your income and expenses.*

How do banks decide how much to lend you?
All banks base their decisions on the same basic factors:

  • How much money you make.

    The more money you bring home every month, the more you will be qualified to borrow.

  • The value of the home you choose.

    The home you purchase will be used as collateral. The house becomes property of the bank if you don't repay your loan.

  • Your other debts.

    The amount of debt you carry on credit cards, revolving charge accounts, and other installment accounts will impact how much additional credit a lender is willing to extend to you.

  • Current interest rates.

    When rates are low, it costs less to borrow the same amount than it would at a higher interest rate.

Banks will take the information, assess the value of the home and evaluate your credit to make a decision about your loan. One critical piece of information is your credit score, which banks use to predict how likely you are to repay your loan.

How do you decide how much to borrow?

  • Income

    Do you expect your income to remain stable or increase?

  • Monthly Budget

    Will your current income and expenses allow you to take on the responsibility of a mortgage and the additional monthly expenses that a new home may bring?

  • Savings

    Do you have money saved to cover the down payment, mortgage origination fees and the closing costs and still keep the monthly mortgage payment within your budget?

Rule of thumb for what you can afford

You'll hear different advice on what you can afford to borrow depending on who you ask, but a good rule of thumb is to keep to these limits:

  • 36% goes to pay debts. Banks generally advise that your mortgage payment not be more than 28% of your monthly income, leaving 8% for other debts like a car loan.
  • 31% of your income goes toward taxes. That's the national average.
  • 33% goes toward everything else – food, clothes, entertainment, vacations, as well as savings and investments that you put away for a rainy day.

*Tools and calculators are provided as a courtesy to help you estimate your mortgage needs. Results shown are estimates only. Speak with a Chase mortgage consultant for more specific information.

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