How much house can I afford in Jacksonville?

The most you can be approved for and the most you should spend are two different numbers. Lenders look at your income, debts, credit and savings to decide what they can lend. You also have to decide what payment fits your life. This article walks through both, with examples for buyers in Jacksonville and Northeast Florida.

Start with your monthly budget

Lenders use a measure called debt-to-income ratio, or DTI. It compares your monthly debt payments to your gross (before-tax) monthly income. There are usually two views of it:

• Front-end DTI: your new housing payment divided by your gross monthly income.
• Back-end DTI: your new housing payment plus all other monthly debts (car loans, student loans, credit card minimums) divided by your gross monthly income.

Many programs look for a back-end DTI somewhere between the mid-30s and the high-40s as a percentage, depending on the loan type, your credit and your savings. Your loan officer can tell you where you land.

Here is an illustration, not a quote. If a household earns $90,000 a year, that is $7,500 a month. At a 36% back-end DTI, total monthly debts could be about $2,700. If the household already pays $400 a month toward other debts, that leaves about $2,300 for the full housing payment. A different DTI limit would change the answer.

Why a comfortable payment beats the maximum

An approval shows what a lender is willing to lend. It does not account for your childcare, travel, savings goals or a possible repair bill. Many buyers choose a payment well below their maximum so they keep room in the budget.

What goes into the monthly payment

A mortgage payment is usually more than principal and interest. In Florida, plan for each of these:

• Principal and interest on the loan.
• Property taxes. They vary by county and taxing district, and a newly purchased home can be reassessed. Check the county property appraiser's website for the home you are considering. Duval and St. Johns counties have different rates.
• Homeowners insurance, including wind coverage. Roof age, location and construction change the quote, so get quotes before you make an offer.
• Flood insurance, if the home is in a flood zone that requires it, or if you choose to carry it.
• HOA dues and, in some newer communities, community development district (CDD) fees.
• Mortgage insurance, if your down payment is below 20% on a conventional loan, or FHA mortgage insurance premiums on an FHA loan.

Down payment and cash to close

Your down payment is only part of the cash you need. Closing costs and prepaid items commonly add roughly 2% to 5% of the purchase price in Florida, and lenders often want to see some savings left after closing. Programs range from no down payment (VA and USDA, for eligible buyers) to 3.5% (FHA) to 20% or more for some conventional and investment loans.

Run your own numbers

Use the payment affordability calculator to see a monthly payment for a price you are considering, and the debt-to-income calculator to see where your ratios fall. These are estimates for education only. A licensed loan officer can look at your full picture, explain the next steps, and tell you what you may qualify for. There is no obligation, and no credit check for the first conversation.