The biggest loan you'll ever take, side by side.

How much house can you actually afford?

The number a lender will approve and the number that's actually affordable are rarely the same. Underwriting will typically allow a debt-to-income ratio up to 43% on conventional loans and up to 50% on some FHA programs — meaning every monthly debt obligation, including the new mortgage, can consume nearly half of gross income. That's the ceiling, not the target. A more durable rule is the 28/36 framework: housing costs at or under 28% of gross monthly income, total debt at or under 36%. On a $100,000 household income, that pegs PITI at roughly $2,330 a month and total debts at $3,000. The number underwriting will let through is closer to $4,200 — and the gap between those two figures is where most household financial stress is born. Run the budget on after-tax take-home, not pre-tax gross, and assume property taxes and insurance go up over time. Estimates only — final approval is set by the partner.

FHA vs. conventional vs. VA: which fits your profile

Three loan types cover the majority of US home purchases, and the differences matter. Conventional loans are the default — issued by private lenders, conforming to Fannie Mae and Freddie Mac guidelines, requiring a 620+ credit score and (usually) PMI below 20% down. FHA loans, insured by the Federal Housing Administration, accept credit scores down to 580 with 3.5% down, or 500 with 10% down — but require a one-time upfront mortgage insurance premium of 1.75% plus an annual premium that doesn't drop off until refinanced or paid down. VA loans, available to active-duty military, veterans and eligible spouses, allow zero down payment, no PMI and competitive rates, but charge a one-time funding fee. The right choice depends on credit, down payment, eligibility and how long the home will be held. A higher-credit borrower with 20% down should usually take the conventional. A first-time buyer with 5% down and a 600 score should usually take the FHA. A veteran with full entitlement should usually take the VA — the math almost always wins.

Closing costs: 2–5% you didn't know about

The down payment is not the only cash needed at closing. Closing costs typically run 2–5% of the loan amount and cover everything from lender origination fees and discount points to title insurance, escrow setup, appraisal, recording fees, transfer taxes and prepaid interest. On a $400,000 mortgage, that's $8,000 to $20,000 on top of the down payment. Some of those costs can be rolled into the loan. Some can be negotiated with the seller as a closing-cost credit, especially in slower markets. Some — like the lender's origination fee — vary noticeably between competitors, which is why comparing the Loan Estimate forms (a federally standardized three-page disclosure every lender must provide within three business days of application) is the only honest way to shop. Two mortgages with identical advertised APRs can have closing costs that differ by several thousand dollars. Read all three pages of every Loan Estimate before committing.

Buying down the rate (discount points) — when it pays off

A discount point is a prepaid interest charge — one point equals 1% of the loan amount, paid at closing in exchange for a lower APR for the life of the loan. The typical trade is roughly 0.25 percentage points of rate reduction per point, though it varies by lender and market. The math is a break-even calculation: the upfront cost divided by the monthly payment savings equals the number of months until the points pay for themselves. On a $400,000 loan, one point costs $4,000 and saves perhaps $60 per month — a 67-month break-even, or just over five and a half years. Points pay off when the loan is held longer than the break-even period, which means they're a bad fit for buyers planning to sell or refinance inside that window, and a good fit for buyers settling into a forever home. Run the break-even on every offer that includes points — never accept the rate sheet's recommendation at face value.

When refinancing a mortgage makes sense — and when it doesn't

Refinancing a mortgage swaps the existing loan for a new one, ideally at a lower rate, shorter term or improved cash flow. The classic rule was that refinancing made sense if the new rate was at least one percentage point below the existing rate — but the right test is the same break-even math used for discount points. Add up the closing costs of the new loan, divide by the monthly savings, and compare the result to how long the home will be held. If the break-even is 36 months and the family plans to move in two years, the refinance loses money. There are also non-rate reasons to refi: dropping PMI once equity crosses 20%, switching from an ARM to a fixed-rate before the reset, shortening from a 30-year to a 15-year to accelerate payoff, or pulling cash out for a renovation. Each one has its own math. The mistake most homeowners make is treating refinance as free; it isn't. New closing costs, a fresh 30-year amortization schedule and the extension of the total interest paid all need to land on the same spreadsheet before signing.