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With home prices stabilizing in many markets and interest rates expected to ease slightly this year, now is a smart time to assess what you can realistically afford when house hunting. The answer depends on a few key financial factors: your income, debt, down payment, credit score, and local housing costs.
A common guideline is the 28/36 rule—meaning your monthly mortgage payment (including taxes and insurance) should not exceed 28% of your gross monthly income, and your total debt payments should stay under 36%. For example, if you make $6,000 a month before taxes, your housing expenses should ideally stay below $1,680.
Interest rates play a major role in affordability. Even a 1% change can significantly affect your monthly payment. In 2025, while rates remain higher than historic lows, they are expected to remain manageable, giving buyers a bit more breathing room compared to recent years.
Another factor is your down payment. The more you put down, the less you need to borrow—and the more favorable your loan terms may be. While 20% is the traditional standard to avoid private mortgage insurance (PMI), many first-time buyers are using 3–10% down payment programs to get started.
Don’t forget to factor in additional costs like homeowners insurance, property taxes, utilities, and potential HOA fees. These can quickly add up and impact what you can comfortably afford each month.
Working with a professional real estate agent and mortgage lender is the best way to understand your full financial picture. They can help you get pre-qualified for a loan and explore options that fit your lifestyle and budget. In 2025’s dynamic market, being informed and prepared is your key to finding a home that truly fits.
For more information, and to find a professional real estate agent to help you understand how much house you can afford this year, visit AddressNIllinois.com. This online resource connects you with experienced real estate professionals who can guide you through the entire home buying process.