How much home can I afford?

Start with the basics.

To figure out your starting price range, look at your monthly budget to see what kind of payment you can comfortably make. It's also important to think about potential changes to your income, other financial obligations and how much cash you'll have on hand for a down payment and other costs.

A general rule is to keep home costs, which includes mortgage payment, property taxes and insurance, between 25% and 36% of your take-home pay. For example, a family bringing home $4,000 per month after taxes should shoot for a $1,000 to $1,440 housing cost. Why take-home pay? That is the money you have available to meet your bills, long-term financial goals and other obligations.

Understand how mortgage lenders think.

If you're going to borrow to pay for your home, you need to know how lending decisions are made. Though situations can vary, some mortgage lenders decide by applying what's called "the 28/36 rule."

• Your mortgage payment, including taxes and insurance, shouldn't be more than 28% of your total income before taxes.
• All your debt — including car payments, credit cards, student loans and, of course, your mortgage payment — shouldn't exceed 36% of your income before taxes.

Lenders also look at your income sources, credit score, and debts and assets. So your specific situation may be different. Just because your lender says you qualify for a $500,000 loan doesn't mean you should borrow that much. There are other expenses you need to examine, too.

Look at your debt now and going forward.

As you're calculating how much home you can afford, you need to look at your current debts and what lies ahead in your life. Will you need to purchase a new vehicle soon? Do you anticipate major medical expenses or college tuition costs? Are you ahead or behind in saving for retirement? By thinking about future expenses now, you're less likely to be regretful later.

Be aware of homeownership costs.

In the excitement of shopping for a new home, many buyers don't factor the many costs of homeownership, including new furniture, appliances, utilities and ongoing repairs. Homeowners insurance and property taxes are two more significant costs you need to account for in your budget. Also consider transportation expenses in your budget. Do you have a longer commute with your new home that will cost money and time?

Do you need private mortgage insurance?

Well, that depends on which type of loan you have. If you're using a Veterans Administration, VA loan, you won't need to pay for private mortgage insurance, or PMI. But you may need to pay a VA Funding Fee instead.

With conventional loans, though, PMI could be a cost that homebuyers overlook. If you have a smaller down payment — typically less than 20% of the purchase price — you'll likely need to pay for PMI. The cost varies depending on the lender and is generally a percentage of your total mortgage amount, so it's an expense worth being aware of.

Loans from the Federal Housing Administration, or FHA, have a similar cost because of mortgage insurance premium, or MIP.

Get the best interest rates.

The interest rate on your mortgage will have a big effect on how much you pay each month. It also will greatly affect the cost over the duration of your loan. If you have a credit score of 740 or higher, you can probably qualify for a lender's best rates. While the 30-year fixed mortgage is common, consider if your budget can support the higher payment of a 20- or 15-year mortgage. You'll likely get a lower rate, build equity faster and save on interest over the life of the loan. Keep in mind, though, the best rate isn't always the best deal. Make sure you factor all the lender fees and closing costs to obtain that rate.

Be an informed buyer.

Buying a home requires careful calculation and extra caution. Before you dive in, learn as much as you can about the homebuying process and examine all your options. Don't be afraid to ask your real estate agent and lender questions. With some preparation and education, you could possibly find a great deal on a home you can comfortably afford.

The USAA Advice Center provides general advice, tools and resources to guide your journey. Content may mention products, features or services that USAA Federal Savings Bank does not offer. The information contained is provided for informational purposes only and is not intended to represent any endorsement, expressed or implied, by USAA or any affiliates. All information provided is subject to change without notice.