How Much House Can You Really Afford?

Jeana Beech
Jun 24
2 min read

Buying a home is one of the biggest financial decisions you'll make — and before you fall in love with that dream house, it's crucial to understand what you can actually afford.

Here’s a breakdown of how to determine your budget so you can shop with confidence (and avoid surprises later).

1. Start with Your Income

Most lenders recommend that your monthly mortgage payment should not exceed 28–30% of your gross monthly income.

Example:If you earn ₱100,000/month, your maximum mortgage payment should be around ₱28,000–₱30,000.

2. Understand Your Debt-to-Income Ratio (DTI)

Your DTI is the percentage of your income that goes toward monthly debts (credit cards, car loans, student loans, etc.).

Most lenders prefer a DTI of 36% or less, including your future mortgage.

Tip: Use this formula(Total Monthly Debt Payments + Estimated Mortgage Payment) ÷ Gross Monthly Income = DTI

3. Check Your Credit Score

Your credit score affects the interest rate you're offered.

Higher score = Lower rate = More affordable loan
Lower scores may require larger down payments or higher interest

Before applying, review your credit report and address any errors or debts that may hurt your score.

4. Consider All Housing Costs

Your monthly payment includes more than just the loan. Factor in:

Mortgage principal and interest
Property taxes
Homeowners insurance
HOA fees (if applicable)
Maintenance and utilities

Budget an extra 1–2% of your home’s value annually for repairs and upkeep.

5. Factor In Your Down Payment

While some programs allow as little as 3–5% down, aiming for 20% can help you avoid private mortgage insurance (PMI) and reduce your monthly cost.

Saving for a larger down payment also gives you more loan options and better interest rates.

6. Use Affordability Calculators

Use a trusted mortgage calculator to test different scenarios based on your income, interest rate, loan term, and down payment. This helps you understand your comfort zone — not just what a lender approves you for.

Final Thought

Just because you can get approved for a certain amount doesn’t mean you should borrow that much. Choose a home you can comfortably afford, even if your financial situation changes.