Mortgage Basics

By Bob Jones Jun10,2023 #Mortgage

How Much Debt is Too Much to Buy a house

Having enough income to make a mortgage payment is generally not the problem when it comes to buying a house. What’s more indicative of whether or not you can buy a house is how much debt you are running up, and what kind of debt you are running up.

The most common types of debt that people incur before they purchase a home are credit card balances and car loans. Both of these types of debt are unsecured, which means that they are not backed by anything other than the borrower’s promise to pay. This is not true of a home mortgage.

A mortgage is secured by the house itself, so if you don’t make your house payment, you will eventually lose your home. That doesn’t mean that it’s not possible to get yourself into trouble when buying a home, but it does mean that there are much less dire consequences if your debt level is manageable before you buy a house.

A comprehensive study of the type of debt people run-up before they buy a house was conducted by the National Association of Realtors and delivered in a report called “Why Do Americans Refinance?”

In this study, Realtors looked at approximately 15,000 respondents who had refinanced their mortgages. They found that over half of those interviewed did so in order to move from a home that had too much debt to one that had enough money for a mortgage payment.

They also found that the average borrower had a mortgage loan amount that was 148 percent of his or her annual income. When it came to total debt, the average amount of debt carried by these borrowers was 265 percent of their annual income.

When they took a closer look at how much debt people were carrying before they bought a home, Realtors found that people with the lowest debt loads were in the highest income brackets. In fact, most of the debt-free people interviewed made about $100,000 a year or more.

As the income decreased, so did the average amount of home loans. They found that almost half of the people who made less than $65,000 per year had no mortgage debt at all.

When it came to unsecured debt, they found that homeowners carried an average amount of credit card debt equal to 9 percent of their annual income. People with mortgages also carried that same type of debt, while a greater portion of people who didn’t have mortgages carried some other type of unsecured debt.

People who had very little disposable income tended to carry debt loads of unsecured debt in addition to credit card debt and car loans. That is, many people with very little money carried too much-unsecured debt before they bought a house.

An interesting statistic from this study is that nearly 70 percent of the people who refinanced their mortgages in order to move to a house with enough money for a mortgage payment had total home loans that were less than the amount of the original mortgage loan.

Fifty-seven percent of these people had unsecured debt as a percentage of their income that was less than the number of original home loans. Only 21 percent ended up carrying over a significant amount of unsecured debt.

In order to buy a house, you need to make enough money in your bank account that you can afford to make the mortgage payment without having to borrow any more money. Make sure that your bank account has enough money available so that you don’t run into trouble before you buy a house.

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How much money do I need to buy a house?

If you’re like most people, you don’t have anywhere near a 20% down payment saved up. So what steps should you take to increase the likelihood that you will be able to afford a home?

The first step toward buying your first home is to take care of any outstanding debts. While there’s no hard and fast rule about how much debt makes the cut, lenders generally prefer that your total debt (including your mortgage) not exceed 36% of your gross monthly income. To find out how much of a mortgage you can afford, use the calculator below.

The calculator will give you an estimate of what kind of mortgage payment you can afford based on your monthly income and the amount you are looking to borrow.

$ Calculate Mortgage Payment Loan Amount $ Interest Rate % Number of Payments Per Year (how many years) Enter This Amount as a Monthly Payment $


Amounts borrowed ($) Enter the maximum amount that you would be willing to borrow.

Your Maximum: Your Annual Income ($) State Zip Select the toggle option to see properties in your area that meet your criteria.

Select the toggle option to see properties close to your location.

Enter This Amount as a Monthly Payment Toggle Search Property New Search Toggle Search


How much money do I need to buy a house in order to avoid getting into debt?

If you are going to put any money towards the down payment, you’re going to have to have some cash set aside for emergencies. The truth is that a large portion of down payments are money that the buyer will often withdraw from their savings. A down payment can be any amount at all but typically ranges from 3% to 20% of the purchase price.

The larger your down payment, the less you have to finance and typically the lower your interest rate will be. If you put less than 20% down, you’ll have to pay for private mortgage insurance. This is an insurance policy that protects the lender in case you default on your mortgage.

This is one of the common questions asked when buying a house: What percentage of the home’s value should I put down? You don’t have to put 20% down to buy a house, but it’s best if you do. If you can’t afford to put 20% down, your interest rate will be higher and your monthly payments will likely be higher.

How Much Debt Can I Have When Buying a House?

Most people need to be aware that they can end up carrying too much debt when they buy a house. The average homebuyer has 36% of his or her overall gross income borrowed in the form of unsecured debt.

For the most part, buying a house is more of an investment than a necessity. So in order to “hit the curve ball” and buy a house, you should have enough money saved up so that you have some flexibility to use it for other things if needed.

Home values fluctuate quite a bit. Unexpected expenses may crop up, and you may need to use some of that money to cover them. Because of the life expectancy of house ownership, you might want to put some money away in a savings account or CD, so that you have it available when needed.

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There are many down-payment assistance programs that can help people who have been rejected by their local Homeowners Association or FHA-approved lenders for a down payment. The Federal Department of Housing and Urban Development (HUD) has an Office of Native American Programs that can help connect you to programs with assistance for down payments.

How Much Debt is Too Much to Buy a House?

Before they buy a house, many people think of debt in terms of how much money they have. They may not think about debt in terms of their overall spending habits and the amount of debt they already have.

In order to buy a house, you need to make sure that you are only carrying the right amount of unsecured debt. Too much-unsecured debt can complicate your home buying decision and make it hard for you to qualify for a mortgage loan with a lender.

How many mortgages You Can Afford Calculator

Did you know that your monthly mortgage payment can vary greatly? There is nothing, absolutely nothing, that all homeowners ever do that will not have an effect on their mortgage payment amount. If the payment amount changes very little each month, the interest rate may change significantly.

Some homeowners don’t pay their entire mortgage each month before they make their next payment. So if a homeowner can afford to pay more than their monthly payment amount, the interest rate will go down. If a homeowner can pay less than their monthly payment amount, the interest rate will go up.

A mortgage payment is the sum of many different payments. The numbers you see on your statement each month are only part of the story. It’s important for homeowners to really understand what goes into those numbers and make sure that the actual value of their property does not decrease when you refinance or make other changes (changing your interest rate).

This calculator will give you an estimated monthly mortgage that you can afford based on the amount you are looking to borrow and your income. Your Maximum This is the maximum amount of money you are willing to borrow for your home. Your Income This is your gross monthly income.


This guide was designed to offer information to consumers who are trying to learn more about the home buying process. If you’re looking for information about getting pre-approved for a mortgage, this is the right place.

The best way to find a lender is online. There are some sites that can help you find lenders with special programs like low down payment mortgages and mortgages with repayment flexibility.

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