Getting pre-approved feels like winning — until you realize the bank's job is to find your maximum, not your comfortable. Affordability really asks two questions: what can you borrow, and what can you live with? Only the second one matters.
Start with 20% down
The classic rule exists for three reasons: no PMI (private mortgage insurance runs roughly 0.5–1% of the loan per year — pure cost), an equity cushion if prices dip, and a smaller payment from day one. On a $350,000 home, that's $70,000 — a daunting number. It's okay to start with a 3–5% down program if PMI is the price of getting in; just know exactly what it costs you.
The price-to-income sanity check
A long-standing guideline: keep your home price around 2.5 to 3.5 times your gross annual income. Earn $100,000? That's roughly $250,000–$350,000. It's a guideline, not a law — heavy student debt pushes you toward the low end; no debt and a dual income give you room at the top.
The bank's number vs. your number
Lenders use the 28/36 rule: housing costs under 28% of gross monthly income, total debts under 36%. They will approve you right up to those lines. But the bank doesn't pay your childcare, your car repairs, or your life — you do. Run your own budget with the real monthly payment before you fall in love with a house.
Don't forget the rest of the bill
- Closing costs: 2–5% of the price, due at signing. On $350,000, that's $7,000–$17,500 almost nobody budgets for.
- PITI: your real monthly cost is principal + interest + property tax + homeowner's insurance — not just the mortgage payment the listing advertises.
- Maintenance: budget about 1% of the home's value per year. Roofs don't care about your budget.
While you're still saving: the renter's head start
The waiting years aren't wasted if you use them. Three moves that make your future mortgage dramatically cheaper:
- Build your credit score into the 740+ range — even a half-point better rate saves tens of thousands over 30 years.
- Keep your debt-to-income ratio low — pay down car loans and cards before you apply; lenders notice.
- Park the down payment somewhere boring — high-yield savings, not stocks. Money you'll need in under five years shouldn't ride the market's rollercoaster.
Quick answers
Is 20% down still realistic?
It's harder than it used to be, and waiting years while prices rise can cost more than PMI ever would. Aim for 20%, but don't let perfect be the enemy of housed.
Should I keep renting instead?
If you'll move within about five years, renting usually wins once you count closing costs, maintenance, and selling fees. Buying pays off over longer stays.
What credit score do I need?
Conventional loans generally want 620+, with the best rates near 740+. FHA loans go lower but add mortgage insurance to the bill.