The general rule of thumb is to aim to have your monthly housing costs add up to less than 30% of your monthly before-tax income.
The better your score, the more likely you are to get a lower interest rate, which means you will be paying less over the life of your loan.
Home buyers with credit scores below 620 tend to have very high interest rates and risky features on their home loans, according to the Consumer Financial Protection Bureau. "It means that for a couple years before you really want to purchase a house, you start working to get your score as high as possible, said Nicole Theisen Strbich, a certified financial planner and director of financial planning with Buckingham Financial Group.
That means paying an extra $9,000 over a 30-year mortgage.
Put down a large down payment The larger your down payment, the less you need to borrow and the smaller your monthly mortgage payments will be.
If you can put down at least 20% of the home price, you can also avoid paying private mortgage insurance — which protects the lender in case you default — saving thousands of dollars a year.
Think shorter The 30-year fixed rate mortgage is the most common home loan, but there are other options available. "The extended maturity on the loan gives buyers a lower monthly payment, but it may in reality cause them to buy more of a home than they can afford."
A 15-year mortgage comes with higher monthly payments, but also has a lower interest rate, which can bring significant savings.