Like getting married and preparing for kids, buying a first home is easier when you understand the big pieces before you start touring houses.
My wife and I have started looking at homes and the financial questions are piling up. How much can we actually afford? How much should we put down? Do we really want to pay PMI (private mortgage insurance)?
How Much Home Can I Afford?
A pre-approval tells you how much a lender may let you borrow, but that isn’t the same as what you’ll be comfortable paying each month. It could be more than what your personal budget actually allows. For us, the most useful number was the total monthly cost. That includes principal and interest, but also property taxes, homeowners’ insurance, mortgage insurance, and any HOA dues. Many lenders collect taxes and insurance through an escrow account, and since those costs can change each year, your payment can too.
Then there’s the cost of owning the home itself: utilities, everyday maintenance, and long-term repairs. While a home inspection is usually optional, it can help show you what you’re taking on before you commit. According to American Home Shield, 89% of new homeowners experience at least one unexpected issue in their first year, such as appliance replacements, pest infestations, roofing problems, plumbing leaks, or general HVAC issues. This is one reason an emergency fund can help in unexpected circumstances.
Down Payments and PMI, Simplified
Many people assume you need 20% down. You don’t. Some conventional loans allow as little as 3% down, while Federal Housing Administration (FHA) loans allow 3.5% for borrowers with a credit score of 580 or higher.
Putting less down can get you into a home sooner, but it means a bigger loan and usually paying private mortgage insurance (PMI) on top of your normal mortgage payment. According to Freddie Mac, PMI typically runs about $30 to $70 a month for every $100,000 borrowed.
The good news is that paying PMI doesn’t last forever on a conventional loan. You can ask to have it removed once you reach 20% equity based on the home’s original value. FHA loans are different, and their mortgage insurance typically stays for the life of the loan if you put down less than 10%. Because different mortgage types have different rules, it’s important to understand the nuances of your situation before making any decisions.
This is the trade-off my wife and I keep coming back to. Paying PMI for a few years could get us into a home sooner, while waiting would mean a smaller loan and no PMI. Either way, don’t empty your emergency fund for the down payment.
Choosing the Right Lender
Shopping around for a lender can save you money. The Consumer Financial Protection Bureau (CFPB) recommends getting Loan Estimates from at least three lenders. The forms are standardized, so they’re easy to compare, and multiple mortgage credit checks within a 45-day window count as a single inquiry for the calculation of your credit score.
Rates are a big part of that decision right now. According to Freddie Mac, the average 30-year fixed rate reached 7.28% on October 1, 2026, up from 6.01% in February. On a $300,000 loan, that difference adds roughly $250 to the monthly interest payment. No one knows where rates will go next, so my wife and I are budgeting around a payment we can afford at today’s rates rather than counting on a future refinance.
Your rate will depend on things like your credit score, down payment, and loan term. Once you’re under contract, you’ll receive a Closing Disclosure at least three business days before closing. Compare it to your Loan Estimate and ask about anything that has changed.
Take It One Step at a Time
We’re still early in the process, and that’s okay. Buying a home is a big decision, and you don’t need to rush. Knowing your total monthly budget, understanding your down payment and PMI options, and comparing lenders can help you figure out not just what you can buy, but whether now is the right time.
Every situation is different, but going in with a plan makes the whole process feel a lot more manageable. If it all feels overwhelming, talk with your trusted financial advisor who can assist you with laying out the options and formulating a plan.
Schedule a Consultation
We have helped our clients answer these questions and more. If you want a clear understanding of your financial future, and need help making changes to reach your goals, schedule a consultation and we can get started.
The material has been gathered from sources believed to be reliable, however Bedel Financial Consulting, Inc. cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. To determine which investments or planning strategies may be appropriate for you, consult your financial advisor or other industry professional prior to investing or implementing a planning strategy. This article is not intended to provide investment, tax or legal advice, and nothing contained in these materials should be taken as such. Investment Advisory services are offered through Bedel Financial Consulting, Inc. Advisory services are only offered where Bedel Financial Consulting, Inc. and its representatives are properly licensed or exempt from licensure. No advice may be rendered unless a client agreement is in place.
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