How much house can I afford with a $1,000 monthly payment?
It depends on your interest rate and loan term. At 7% over 30 years, a $1,000 monthly payment supports a loan of about $150,030. A lower interest rate or longer term increases the amount you can borrow.
What is the 28/36 rule for loan affordability?
The 28/36 rule suggests spending no more than 28% of gross monthly income on housing costs and no more than 36% on total debt payments. This helps ensure you don't overextend yourself.
Does a longer loan term mean I can borrow more?
Yes. A 30-year term spreads payments over more months, reducing the monthly payment for a given loan amount — or conversely, allowing a larger loan for the same monthly payment. However, you pay significantly more interest over the life of the loan.
How does my interest rate affect borrowing power?
Even small changes in interest rate have a large impact. At 6% over 30 years, a $1,500/month payment supports a $250,000 loan. At 8%, the same payment only supports about $204,000.
Should I pay points to lower my interest rate?
Buying discount points lowers your rate and monthly payment but requires upfront cash. Each point typically costs 1% of the loan amount and reduces the rate by about 0.25%. It usually pays off if you keep the loan for more than 5 years.