Buying a Home: How Much Can I Afford?

These three key questions can help you know where you stand. 

5 Min Read

Owning a home can be a wonderful thing, providing you a place of your own, with all kinds of amenities, such as a backyard for your friends and family to enjoy and more room inside, too. In addition, a home is a potentially valuable investment. But if you’re thinking of buying—especially if it’s your first home purchase—there are key questions to consider, such as:

  • What kind of home price should you look at?
  • How might your credit impact your mortgage?
  • How much cash will you need?

If you’re a renter, you may be surprised to discover that you can often own a home for about the same monthly amount you’re currently paying. But first, you’ll need to answer three of the most important questions any homebuyer faces:

1.   What Can I Afford?

When you’re getting ready to shop for a new home, the first thing to figure out is your price range.

  • One general guideline is to look at homes that cost about three times your annual gross income. Of course, every case is different. Some borrowers have levels of savings, debt or other factors that may impact their target price range. But the “3x income” guideline can be a good place to start, especially for first-time buyers.

  • If you’re currently renting, you may already have a sense of how much of a total monthly housing payment is right for you. You can work with a lender to end up with a payment that may be similar to your rent.

  • The term of the loan and interest rate play a key role in determining your payment amount. To see how the amount of your mortgage affects your monthly payment, check the M&T Mortgage Resource Center.

  • Your monthly mortgage payment will include the principal and interest on your loan, as well as property taxes and insurance.

  • Keep in mind that, in addition to mortgage costs, as a homeowner you’re responsible for home maintenance, utility and repair costs. You will want to be sure to budget a few hundred dollars each month for maintenance and unexpected repairs.

2.   How Might My Credit Impact My Mortgage?

When applying for a mortgage, it can help to have a favorable credit profile. In fact, your credit score is among the key factors that lenders will look at, along with other aspects, such as savings, income and debt. If your credit profile isn’t ideal, don’t get discouraged. Many lenders provide programs that can help qualify borrowers with less-than-perfect credit history, so be sure to check with your lender. Factors such as a history of on-time rent or bill payments can help. 

  • One well-known type of credit score is your FICO score, which can range from 300-850. FICO considers 580-669 a fair score, 670-739 good, 740-799 very good, and 800 and above exceptional. SOURCES: Fico, US News

  • FHA loans, which are insured by the Federal Housing Administration and designed for low-to-moderate income ranges, and scores that are “fair” and above are generally acceptable (though some scores on the low end require that additional conditions be met).

  • For conventional, non-FHA loans, you can expect lenders to look for scores most often in the “good” range and above.

  • Rest assured: Even if your number isn’t where you’d like, M&T may have options for you. Check the M&T Mortgage Resource Center to learn more.

3.   How Much Cash Do I Need?

When buying a home, it’s critical to make sure you have enough cash for your downpayment and closing costs.

  • FHA loans require a minimum of 3.5 percent of the purchase price as a downpayment, while conventional loans require 5 percent down. Lenders may offer additional programs with other low downpayment options and the ability to access gift and grant funds. Be sure to check on available programs with your lender.

  • In addition to a downpayment, closing costs can further deplete one’s savings when buying a home. The good news is many lenders, like M&T, offer low downpayment options and the ability to access gift and grant funds that can often assist with downpayment and closing costs. So be sure to check on available programs with your lender.


Once you have the answers to these three key questions each homebuyer faces, organize your efforts and get the process started by filling out our easy worksheet.

Learn more about how M&T can help you reach your homeownership goals and get preapproved here or contact an M&T mortgage professional at 1-888-253-0799.

DISCLOSURE: This article is for informational purposes only and is neither a loan commitment nor a guarantee of any interest rate. If you choose to apply for a mortgage loan, you will need to complete our standard application. Our consideration for approval of your mortgage loan application will include verification of the information obtained in connection with your request, including but not limited to income, employment, asset, property value and/or credit information. Our loan programs are subject to change or discontinuation at any time without notice. Not all products are available in all states.