Getting approved for a mortgage is exciting! With a green light on your mortgage approval, you might be inclined to shop for homes at the top of your budget. But should you? The truth is, qualifying for a mortgage doesn’t guarantee you can afford it. You’re the one paying the bills each month, and you’re the best judge of what fits your budget. So how do you know where to draw the line? Before you make a decision, look at the big picture, including the following affordability factors to see how they can affect your overall and monthly costs.

Annual Income

Your ability to make mortgage payments depends on your income, so it’s important to take a realistic look at your income over the past year. Were there any gaps when you didn’t earn money? Did your take-home pay fluctuate? It pays to look ahead and consider any potential income changes and how this could affect your ability to pay your mortgage.

Monthly Debt Payments

Consider the other debts or loans you may be currently paying off (auto loans, student loans, credit cards, etc.) and think about how this new loan will factor into your monthly payments. The goal is to make sure that your debt payments won’t consume too much of your income.

Down Payment

The larger your down payment, the lower your monthly mortgage payment will be. A 20 percent down payment is ideal because it gives you a number of advantages such as instant equity in your home and avoiding the cost of private mortgage insurance. (Although some lenders like Navy Federal offer some mortgage options that don’t require mortgage insurance.) Even if you don’t have a large down payment, it’s possible to qualify for a mortgage with a low down payment, or with Navy Federal’s 100% financing options,* including no down payment at all.

Your Lifestyle

Think about where your money goes now and if you plan to re-evaluate how you spend money in the future. Make sure there’s enough wiggle room in your budget to continue pursuing what’s important to you in life, whether that’s money for travel, visiting friends and family, adopting a pet or paying for children’s
sports and activities.

Interest Rate

Mortgage rates go up and down based on the current federal funds rate, which is out of your control. But there are some factors, such as your credit score, that impact the interest rate you qualify for, which ultimately makes a difference in how much you’ll pay over the life of the loan.

Terms of the Loan

The standard term length for a mortgage is 30 years. If you opt for a shorter term, such as 15 or 20 years, you may secure a lower interest rate and pay less in interest in the long run. But your monthly payments would be higher since you’re paying off the loan faster.

Property Taxes

Property taxes vary depending on the value of your home and its location, but can easily add up to a few hundred dollars a month.

Homeowners Insurance

Get an estimate of homeowners’ insurance costs for the homes you’re considering buying and build that into your budget before making a decision.

Home Maintenance

It’s a good idea to set aside at least 1 percent of the home’s purchase price for annual maintenance and utilities.

We’re here to help you buy a home that fits your family and your budget. Use our Monthly Mortgage Payment calculator to get an idea of what your payment could be. Whether you’re a first-time or seasoned homebuyer, explore Navy Federal’s MakingCents home-buying track for helpful tips and resources.

*Product features subject to approval. Available for purchase loans only. Loans may be subject to an additional funding fee, which may be financed up to the maximum loan amount.