Five Numbers to Work Out Before Applying for a Mortgage

Lenders usually require a debt-to-income ratio (DTI) of 40%–43% or less: all monthly debt payments divided by monthly income.

At 20,000 income with no other loans, a 40% cap gives 8,000 for the mortgage. An existing 2,000 car payment cuts it to 6,000 — which is why clearing small high-rate debts before applying often pays off.

At 4.2% over 30 years (0.0035 monthly, 360 payments):

Loan = 8000 × (1 − 1.0035⁻³⁶⁰) ÷ 0.0035 ≈ 1.64 million

With 30% down, the price is roughly 1.64 ÷ 0.7 ≈ 2.34 million.

That is an approval ceiling, not a recommendation. Maxing it out means tight cash flow for three decades; leaving a 20% buffer is wiser.

On a 2.34 million price with 30% down (700,000), also budget:

• Deed tax: often 1%–1.5% for a first home (23,000–35,000), more for a second
• Maintenance fund: charged by floor area, thousands to tens of thousands
• Agent, appraisal, registration and insurance fees: roughly 1%–3% combined

Together that is typically 3%–8% of the price — 70,000–190,000. Real cash needed is about 770,000–890,000, not 700,000.

If only a few thousand remain after closing, one job loss or illness forces high-interest borrowing. Keep six months of expenses outside the down payment and fees (8,000 monthly → about 48,000).

"Affordable" means covering all four: down payment, closing costs, emergency fund and the first year of payments — not just scraping together the deposit.

Add one percentage point: on a 1.64 million loan, 4.2% → 5.2% lifts the payment from 8,000 to roughly 9,000, about 360,000 more over 30 years.

With a variable rate or an upcoming reset, build that gap into the budget. Get pre-approved first, then choose the property — never the reverse.