If you’re getting a mortgage, never purchase a house with a monthly payment that chews up more than a fourth of your take-home pay—otherwise, you’ll be house poor!

And that 25% limit includes everything—principal, interest, property taxes, home insurance and homeowners association (HOA) fees. Not to mention, if your down payment is lower than 20%, you also have to pay private mortgage insurance (PMI)—which protects your lender (not you) if you stop making payments.

To be clear, take-home pay is also called net income—the amount that goes into your bank account after taxes and other deductions are subtracted from your gross income. If you’re married, you’ll also want to include your spouse’s net monthly income in this amount.

Once you figure out what your monthly take-home pay is, just multiply that number by 25% to get your max monthly house payment. So, if you take home $6,600 a month, your monthly house payment should be no more than $1,650.

Next, use our Mortgage Calculator to try out different home prices and down payments. That way, you can find a monthly payment that’s within 25% of your take-home pay.

Let’s test this out on our example of a maximum monthly house payment of $1,650. Using our Mortgage Calculator, if you enter in a 15-year fixed-rate mortgage with a 6% interest rate, a 1% property tax rate, a home insurance policy that costs $1,200 per year, and a PMI rate of 1% (for down payments below 20%), here are some home prices within your budget:

• $160,000 home with a 5% down payment ($8,000)
• $168,000 home with a 10% down payment ($16,800)
• $204,000 home with a 20% down payment ($40,800)
• $230,000 home with a 30% down payment ($69,000)

Remember, these are just estimates. Use our calculator to try other combinations and find the right mortgage amount, interest rate and down payment for your budget.

Your emergency fund can cover major home disasters, but some homeownership expenses also need to be factored into your monthly budget, like:

• Utilities
  The cost of paying for things like electricity, gas, water, internet and trash pickup can vary depending on the house. If you’re used to paying for utilities as a renter in a small apartment, you might need to double or even quadruple that budget as a homeowner.
   
• Maintenance and Repairs
  Depending on the age of the home you buy, you may have to tackle several home projects in a year. Projects could include things like maintaining the yard or HVAC system, repairing a leaky roof or cracked driveway, or solving a mold problem. Any of these things could cost upwards of $1,000.
   
• Upgrades and Additions
  If you’ll be saving up for a few major home upgrades, you need to build room in your monthly budget for those expenses too. Even something like a minor kitchen remodel could set you back tens of thousands of dollars. Always make sure you count the cost for upgrades and save the cash for them before you start.

After you figure out how much house you can afford, you’ll have more confidence saving for the right down payment amount and finding a realistic home you love. You got this!