February 2025

4 tips to help find a mortgage within your budget

If you're hoping to buy a home, you want to be able to enjoy it for a long time. Making sure you can afford your mortgage payments now — and in the future — is key.

If you're not sure what you can afford, a Bank of America lending specialist has many tools you can use to guide your decision. Plus, these strategies can help you estimate what you can afford and ensure the mortgage you get will stay within your budget.

1. Determine how much you can afford

In the simplest terms, an affordable mortgage is one that fits in your budget. But the details on that will vary depending on your income and other monthly expenses. Bank of America's Affordability Calculator can help you get an idea of how much you can afford.

  • The 28/36 rule. A common rule of thumb used by lenders to calculate affordability is the 28/36 rule. This rule uses your debt to income ratio or DTI. While many lenders may be flexible about the DTI depending on your situation, the typical goal is that your mortgage payment should be no more than 28% of your pretax monthly income, and your total monthly debt payments — including your mortgage — should be no more than 36% of your pretax income.

  • Other costs of homeownership. Keep in mind that the 28/36 rule doesn't cover all expenses. You'll also want to consider other costs of homeownership such as homeowners association fees, utilities and maintenance. Plus, if you have other major costs such as child care, you may need to spend even less on your mortgage.

2. Consider ways to reduce costs

Each month, your mortgage payment will include principal, interest, taxes and homeowners insurance. You may also need to pay private mortgage insurance (PMI) if you put less than 20% down. You'll also need to consider homeowners association fees. Although they're not typically paid with your monthly mortgage payment, HOA payments can have a big effect on your budget.

Making good choices about certain aspects of your loan can help keep your payment within your budget. Here are some options:

  • Make a bigger down payment.The more you borrow, the bigger your payment will be. A larger down payment means a smaller loan. If you don't have much saved, check out the many state and local programs that offer down payment help for first-time or modest income homebuyers.Footnote1 Search for options in your area on the Bank of America Down Payment Center.
  • Note: If you can afford a reasonable monthly payment but don't have much for a down payment, consider a low down payment mortgage. Loans like an FHA loanFootnote2 or Bank of America's Affordable Loan Solution® mortgageFootnote3 could help you buy sooner.
  • Shop around for a good interest rate. Your rate can have a big effect on your monthly payment. For instance, if you bought a $400,000 house with a 30-year mortgage and 20% down, your monthly principal and interest payments (P&I) would look like this, depending on your rate:
  • At 7% P&I = $2128.97
  • At 6% P&I = $1918.56
  • At 5% P&I = $1717.83

  • Buy down your interest rate. If you have the money available, you can lower your interest rate by paying an upfront fee. That can make your monthly payment more affordable.

  • Don't forget other expenses. Your monthly payment also includes property taxes and homeowners insurance. That's why some buyers choose lower-tax locations when looking for a home. It also pays to look for the best deal on insurance.

3. Get ready to shop by confirming what you can borrow

First, check your credit history and credit score, and clean up any problems such as incorrect information or old debts. That will clear the way for a smoother mortgage process. Then talk to a lending specialist and get prequalifiedFootnote4 for a mortgage to confirm what you can actually borrow. You can also discuss the type of mortgage that will work best for you.

If you're ready to buy now, move quickly and get preapprovedFootnote5 by submitting your application to a lending specialist. This will help you easily submit offers with confidence. (A preapproval is only good for 90 days, so make sure you're ready to shop seriously when you take this step.) Note: You won't be able to lock your rate until you have found a property.

4. Engage a real estate professional

While it's possible to buy a home on your own, real estate professionals can use their knowledge of the market to help you find a home that works for you and is within your budget. They can also help you assess your wish list and see where you may be able to compromise in order to get the home you need at the right price.

Finding an affordable home can be a challenge, so stick with it. New homes come on the market all the time, and eventually you'll find one that's right for you.

A note from your lending specialist

Remember, I'm here to help you assess your budget and explore loan options. And once you find a home, you can count on me from application till closing.

1 Down payment and/or closing cost assistance programs may not be available in your area. Down payment and/or closing cost assistance amount may be due upon sale, refinance, transfer, repayment of the loan, or if the senior mortgage is assumed during the term of the loan. Some programs require repayment with interest and borrowers should become fully informed prior to closing. Not all applicants will qualify. Minimum credit scores may apply. Sales price restrictions and income requirements may apply. Homebuyer education may be required. Owner-occupied properties only. Maximum loan amounts may apply.


2 Monthly Mortgage Insurance Premiums (MIP) and Upfront Mortgage Insurance Premiums (UFMIP) apply. Maximum loan amounts vary by county.


3 Maximum income and loan amount limits apply. Fixed-rate mortgages (purchases or no cash out refinances), primary residences only. Certain property types are ineligible. Maximum loan-to-value (“LTV”) is 97%, and maximum combined LTV is 105%. For LTV >95%, any secondary financing must be from an approved Community Second Program. Homebuyer education may be required. Other restrictions apply.


4 Prequalification is neither preapproval nor a commitment to lend; you must submit additional information for review and approval.


5 Final loan approval is subject to satisfactory appraisal and title review and no change in borrower credit and financial condition. Preapproval is subject to terms and conditions and timely submission of required documentation; ask your Lending Specialist for details. Preapproval does not commit to the continued availability of the loan program. The interest rate shown in a preapproval is based on our current pricing and is not locked. You may choose to lock an interest rate after we receive the complete and executed purchase contract. Borrower must submit purchase contract within 90 days of preapproval. If the rate at time of lock is higher, or a rate lock expires prior to funding, or for adjustable-rate loan programs when the index value rises, we must determine your ability to repay the loan at the higher rate, which may lower the loan amount or invalidate the preapproval. Not available on all loan products. Not available on refinance loans.


MAP7415591 | 12/2024