How Much Can I Afford?
🏡 How Much House Can I Afford in Louisiana?
1. Understand Debt-to-Income (DTI) Ratios
Lenders use DTI ratios to evaluate your ability to manage monthly payments and repay debts. There are two key ratios:
Front-End Ratio: Percentage of your gross monthly income that goes toward housing expenses (principal, interest, taxes, insurance).
Back-End Ratio: Percentage of your gross monthly income that covers all monthly debts, including housing, car loans, student loans, and credit cards.
Different loan programs have varying DTI requirements:
Fannie Mae: Typically allows up to 36% front-end and 45% back-end DTI ratios.
FHA Loans: Allow up to 31% front-end and 43% back-end ratios but we’ve seen DTI ratios as high as 55% with compensating factors (ask us for more info — because we know how to structure the loan file and highlight its strengths!).
VA Loans: Generally want a back-end DTI ratio of 41% or less, HOWEVER, the VA does not set a strict maximum DTI ratio. Instead, a DTI ratio exceeding 41% requires closer scrutiny and compensating factors, such as residual income, excellent credit history, or substantial liquid assets. The VA emphasizes residual income over DTI ratio as a key factor in loan approval decisions.
USDA Loans: Often permit a back-end DTI ratio up to 46%.
2. Calculate Your Monthly Budget
Assess your monthly income and expenses to determine how much you can allocate toward a mortgage. Consider the following:
Gross Monthly Income: Your total income before taxes and deductions.
Monthly Debts: Include car payments, student loans, credit card payments, etc.
Estimated Housing Costs: Factor in mortgage payments, property taxes, homeowners insurance, and, if applicable, private mortgage insurance (PMI).
Use the Fannie Mae Mortgage Affordability Calculator to input your financial details and estimate how much house you can afford.
Also, keep in mind this is something we can do for you!
3. Consider Down Payment Requirements
Down payments impact your loan amount and monthly payments. Different programs have varying requirements:
Conventional Loans (Fannie Mae/Freddie Mac): Minimum down payment of 3%.
FHA Loans: Minimum down payment of 3.5%.
VA Loans: No down payment required for eligible veterans and service members.
USDA/Rural Development Loans: No down payment required for eligible rural properties.
In Louisiana, various down payment assistance programs may be available to help first-time homebuyers. Check with us for options.
4. Account for Additional Costs
Beyond the mortgage, consider other costs associated with homeownership:
Closing Costs: Typically range from 2% to 5% of the loan amount.
Property Taxes: Vary by parish; research local rates.
Homeowners Insurance: Required by lenders; costs depend on property value and location.
Maintenance and Repairs: Budget for ongoing upkeep of the property.
✅ Final Thoughts: How Much Can You Afford?
Understanding your mortgage affordability is a powerful first step toward homeownership. But calculators and loan limits only go so far—what you really need is a personalized plan based on your income, goals, and local Louisiana market conditions.
That’s where I come in.
At Parish Lending, I’ll walk you through:
What your budget really looks like
Which loan programs (FHA, VA, USDA, Conventional) fit your situation
How to structure your offer and closing costs so nothing catches you off guard
📞 Let’s talk about how much house you can actually afford.
Text or call me anytime: 225.900.7447
Or email: erica@parishlending.com
You don’t have to guess—you just have to start.