How Much Mortgage Can You Afford? Budgeting Tips
While getting pre-approved by a lender is a helpful first step, understanding your own budget and what you’re truly comfortable spending is even more important. Overstretching your finances can lead to stress and long-term financial strain.
In this post, we’ll walk you through how to calculate a realistic mortgage budget, including key rules, costs to consider, and tips to stay financially confident.
✅ Start With the 28/36 Rule: How Much Mortgage Can You Afford? Budgeting Tips
Lenders commonly use the 28/36 rule to determine affordability:
-
28% of gross monthly income for housing costs (mortgage, taxes, insurance)
-
36% of gross monthly income for total debts (housing + credit cards, car loans, student loans)
Example:
If you earn ₦700,000/month (gross income):
-
28% = ₦196,000 for total housing costs
-
36% = ₦252,000 for all monthly debt payments combined
Use these numbers as a guideline, not a hard rule. Depending on your lifestyle and goals, you might want to stay well below these limits.
🧾 Understand What Your Monthly Mortgage Includes
Your monthly mortgage payment includes more than just repaying your loan.
Here’s what you may pay each month (PITI):
-
Principal – The amount you borrowed
-
Interest – The cost of borrowing that amount
-
Taxes – Local property taxes
-
Insurance – Homeowners insurance, and possibly private mortgage insurance (PMI)
Additional Costs:
-
HOA fees (if applicable)
-
Utilities and maintenance
-
Emergency savings for repairs
🏦 Calculate Your Budget, Not Just Your Approval
A lender may approve you for more than you’re comfortable spending — but that doesn’t mean you should max out your approval amount.
Ask yourself:
-
Can I still save money each month?
-
What if I have unexpected expenses?
-
How will my lifestyle change with a larger mortgage?
Being house-poor (where most of your income goes toward your home) can limit your financial flexibility.
Don’t Forget the Upfront Costs
Beyond your monthly mortgage, you’ll need to budget for:
-
Down payment (typically 3%–20% of the home price)
-
Closing costs (2%–5% of the purchase price)
-
Moving expenses
-
Furniture or upgrades
Pro Tip: How Much Mortgage Can You Afford? Budgeting Tips
Keep an emergency fund even after you close owning a home comes with unexpected costs.
Use Online Mortgage Calculators: How Much Mortgage Can You Afford? Budgeting Tips
Online tools can help you estimate how much home you can afford based on your income, debt, interest rate, and down payment.
Try several scenarios with:
-
Different down payments
-
Higher or lower interest rates
-
Varying home prices
This gives you a range to work with when you begin house hunting.
Tips to Stay on Budget: How Much Mortgage Can You Afford? Budgeting Tips
-
Set your own limit below your lender’s approval amount
-
Choose a fixed-rate mortgage for predictable payments
-
Avoid large new debts (like a car loan) before or after buying
-
Plan for annual increases in taxes and insurance
-
Work with a real estate agent who respects your budget
Final Thoughts on How Much Mortgage Can You Afford? Budgeting Tips
Understanding how much mortgage you can afford isn’t just about what the bank says — it’s about what fits your lifestyle and long-term goals. With a realistic budget, smart planning, and room for flexibility, you can enjoy homeownership without financial regret.
