Lenders use the 28/36 rule to gauge affordability. Your total housing payment should not exceed 28% of your gross monthly income, and total debt payments should not exceed 36%.
For example, if you earn $5,000 per month before taxes, your mortgage payment (including taxes and insurance) should stay below $1,400. If you have existing debt, your budget adjusts accordingly.
A larger down payment reduces your loan amount and monthly payment while eliminating PMI if you reach 20% equity. Even a 5% increase can save thousands in interest.
Closing costs average 2% to 5% of the loan amount. On a $350,000 mortgage, expect $7,000 to $17,500 in additional fees at settlement.