---
title: How Much House Can I Afford?
description: Before you buy a home, it's critical that you take preliminary steps to determine your dream house matches up with your total household income.
image: https://info.sdhda.org/hubfs/Picture4.png
---
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Your source for expert information on housing in South Dakota
# How Much House Can I Afford?
So, you’re looking for a new place? Buying a new home can be a lot of fun; all those years of hard work, saving and research are finally coming to fruition. You know that you’re *going* to buy a house soon, but do you know *how much* of a house? It’s easy to get wrapped up in the thrill of purchasing a new house…but be sure to stop and think about this important question.
**Here are some tips to help you find out how much house you can afford.**
## Pull out the Planner
Generally, buying a house will be someone’s most expensive purchase they’ll ever make. It’s important to figure out your earnings and expenses, first. Your total house value should be no more than three to five times your total household’s annual income. If you have a significant amount of debt, you should consider waiting to buy your dream home. A good rule of thumb is that your monthly mortgage payments should be no more than 25% of your monthly income. You may be able to own a more expensive house if you put down an appropriate downpayment. No matter what, the bigger the downpayment, the less you’ll owe on your monthly mortgage.
**Check out SDHDA’s [payment calculator](https://www.sdhda.org/homeownership/tools/payment-calculator) to estimate your monthly payments.**
## Additional Costs
Be aware that the cost of a home is more than a downpayment and monthly mortgage payments. You need to keep these costs into consideration before figuring out how much you can afford:
- Home Appraisal
- Closing Costs
- Property Taxes
- Homeowner Insurance
**Check out [SDHDA’s Fixed Rate Plus LOAN](https://www.sdhda.org/homeownership/downpayment-assistance) to help with downpayment or closing costs.**
## Stretch Your Dollar
Once you’ve figured out what you can afford, you don’t necessarily have to buy the biggest, most expensive house you can afford. Consider buying a house under your budget. It isn’t smart spending if you’re just barely able to make those monthly mortgage payments. If disaster strikes and a tree branch goes through a window or two, coming up with the right money can be an unnecessary hassle.
After you’ve figured out how much you can afford comes the fun part… shopping for your new home!
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