Home affordability is calculated using the 28/36 rule. This means your mortgage payment should not exceed 28% of your gross monthly income, and your total debt payments (including mortgage) should not exceed 36% of your gross monthly income.

Several factors influence home affordability:

• Your annual gross income
• Monthly debts and obligations
• Down payment amount
• Interest rate on your mortgage
• Loan term (number of years)
• Property taxes and insurance costs
• Your credit score

A 20% down payment is ideal because it allows you to avoid private mortgage insurance (PMI), which protects the lender in case you default on the loan. However, many loan programs allow down payments as low as 3-5%. The right amount depends on your financial situation and goals.

Your credit score significantly impacts the interest rate you'll qualify for. Higher credit scores generally qualify for lower interest rates, which can save you thousands of dollars over the life of your loan and increase the home price you can afford.