How lenders gauge what you can afford

When you apply for a conventional loan, the lender looks at two key ratios. The front‑end ratio compares your projected housing payment to your gross monthly income; most lenders cap this at about 28%. The back‑end ratio adds all other monthly debts (car loans, student loans, credit cards) and usually must stay under 36% of gross income.

Key components of the housing payment

  • Principal and interest on the loan.
  • Property taxes – in Utah these vary by county but are typically 0.5%–1.2% of the home’s value annually.
  • Homeowners insurance.
  • Homeowners association (HOA) fees, if applicable.

Down payment and private mortgage insurance (PMI)

Conventional loans allow down payments as low as 3% of the purchase price, but a 20% down payment removes the need for PMI, which can add 0.3%–1.0% of the loan amount per year to your costs.

Utah‑specific factors that can affect affordability

  • Utah has a relatively low cost‑of‑living compared with many coastal states, which can translate to lower property‑tax rates in many counties.
  • The Utah Housing Corporation offers down‑payment assistance and mortgage credit certificates for first‑time buyers, which can effectively increase the home price you can afford.

Example calculation (illustrative only)

Suppose you earn $80,000 gross per year ($6,667 per month). Using the 28% front‑end rule, your maximum housing payment would be about $1,867 per month. Assuming a 30‑year loan, a 4.5% interest rate (rates fluctuate), 20% down, and including estimated taxes, insurance, and a modest HOA fee, this payment aligns with a home price roughly between $350,000 and $400,000. If you qualify for down‑payment assistance, you could potentially stretch that range higher.

These figures are illustrative; your personal situation, current interest rates, and lender policies will shape the exact amount you can borrow.

This article provides general information and is not personalized financial advice. Consult a qualified mortgage professional for advice tailored to your circumstances.