How Much Home Can You Really Afford? Let’s Break It Down

Claudia San Roman
Jul 2
2 min read

Buying a home is one of the biggest financial decisions you’ll ever make—and it’s about more than just qualifying for a loan. Many first-time buyers assume their pre-approval amount is their budget, but the truth is: what you can borrow isn’t always what you should spend.

Let’s break down how to determine how much home you can comfortably afford.

1. Start With Your Monthly Budget

Before looking at houses, take a close look at your monthly expenses:

Rent or current housing costs
Utilities, subscriptions, groceries
Car payments, insurance, fuel
Childcare, healthcare, savings goals

Ask yourself: How much am I currently paying for housing, and how much of a stretch am I comfortable with?

A good rule of thumb: Your monthly housing cost (mortgage, taxes, insurance, HOA fees) should be no more than 28–30% of your gross monthly income.

2. Use the 28/36 Rule

Lenders often use this guideline:

28% of gross income = max housing costs
36% of gross income = max total debts (housing + credit cards, loans, etc.)

For example:If you earn ₱120,000/month (or $6,000), keep your total housing costs around ₱33,600 ($1,680). If you have other debts, your total obligations shouldn’t exceed ₱43,200 ($2,160).

3. Factor in the Hidden Costs of Homeownership

Aside from the mortgage, remember these recurring costs:

Property taxes
Homeowners insurance
Private Mortgage Insurance (PMI) if your down payment is below 20%
Repairs and maintenance (budget around 1–2% of home value per year)
HOA or condo fees

These can add ₱10,000–₱30,000/month or more, depending on your location and the type of home.

4. What’s Your Down Payment?

More down = lower loan = lower monthly payments.

Typical down payments:

3–5% for first-time buyers
10–20% to avoid PMI and secure better loan terms

A ₱500,000 home with 20% down (₱100,000) results in a smaller loan, smaller monthly payments, and long-term savings in interest.

5. Think Beyond the Bank's Approval

Just because you're approved for a ₱700,000 loan doesn’t mean you need to use it all. Stretching too far can lead to stress, especially when emergencies or lifestyle changes come up.

Ask yourself:

Am I still able to save each month?
Will this mortgage prevent me from traveling, investing, or enjoying life?
What if my income changes?

6. Use Online Calculators (But Be Cautious)

Mortgage calculators are a great starting point, but they often leave out things like taxes, insurance, and maintenance. Always overestimate costs and test multiple scenarios before deciding.

Final Thought: It’s About Comfort, Not Just Qualification

Buying a home should feel exciting—not financially overwhelming. Knowing your true affordability helps you shop with confidence, make stronger offers, and enjoy homeownership without regret.

If you’d like a free home affordability consultation or want help estimating your monthly cost based on current rates, I’d be happy to assist!