Affordability

How much house can I afford?

Educational guide · Updated 2026

There are two very different answers to this question: what a lender will let you borrow, and what you can comfortably afford. They're often not the same number, and confusing them is one of the most common ways buyers end up stretched thin.

Running the numbers

If your gross monthly income is $7,500 and you have $400/month in car and student loan payments, here's how that plays out: your maximum total monthly debt (36% rule) is $2,700. Subtract the $400 existing debt and you have $2,300 for a mortgage payment. At a 7% rate on a 30-year loan, $2,300/month supports roughly a $345,000 loan — before taxes, insurance, and HOA.

How lenders decide what you qualify for

Lenders mainly look at your debt-to-income ratio (DTI) — your total monthly debt payments divided by your gross monthly income. Most lenders want your total housing payment plus other debts to stay under roughly 43-50% of your gross income, depending on the loan type.

The key word there is gross — before taxes. A number that looks affordable against your pre-tax income can feel very different against what actually lands in your bank account.

What "comfortable" actually means

A more conservative rule many financial planners suggest is keeping your total housing payment under about 28% of your gross income, or around 25-30% of your take-home pay. That leaves room for the things a DTI calculation doesn't see: retirement savings, an emergency fund, childcare, travel, and the simple buffer that keeps an unexpected expense from becoming a crisis.

The costs people forget to include

Your monthly housing cost is more than principal and interest. A realistic budget also includes property taxes, homeowners insurance, mortgage insurance if your down payment is under 20%, HOA fees if applicable, and ongoing maintenance. Maintenance alone often runs 1-2% of the home's value per year.

How to find your real number

Start from your comfortable monthly payment, not from a maximum loan amount. Work backward: decide what you can pay each month without straining the rest of your life, then figure out what home price that supports at current rates. That's the opposite of how many buyers do it — and it's why some people feel "house poor" even though they technically qualified.

What lenders look at vs what you should look at

Lenders calculate the maximum they'll lend based on your qualifying income and DTI ratios. That number is not the same as what you should spend. Many buyers find that borrowing at the top of their qualification leaves no room for savings, emergencies, or lifestyle expenses. A commonly recommended approach: calculate what you qualify for, then ask yourself what monthly payment you're actually comfortable with — and use that as your ceiling, not the bank's number.

The full picture: PITI and beyond

Most mortgage calculators show principal and interest. Your actual monthly payment includes four more items:

Principal and Interest (P&I): The loan payment itself. On a $300,000 loan at 7% for 30 years, this is $1,996/month.

Property Taxes (T): Typically 0.5–2.5% of the home's assessed value per year, divided into monthly escrow payments. On a $400,000 home in a 1.2% tax area, that's $400/month.

Homeowners Insurance (I): Typically $80–$200/month depending on the property and location.

PMI (if applicable): If you put less than 20% down on a conventional loan, add 0.5–1.5% of the loan annually, divided monthly.

HOA fees (if applicable): Can range from $100 to $1,000+/month depending on the community.

A home that "pencils out" on a basic calculator may look very different when all five components are included.

Pre-approval gives you the real number

Online affordability calculators are useful for ballpark estimates, but a pre-approval gives you the actual number a lender will lend. It involves a hard credit pull, income verification, and asset review. The pre-approval letter shows sellers you're a serious buyer. Get pre-approved with at least two lenders to compare terms — it's the single most important step before starting your home search.

How down payment size changes affordability

A larger down payment directly reduces your loan amount and monthly payment, and eliminates PMI at 20%. But it also depletes your savings. The trade-off: a $50,000 down payment vs. $100,000 on a $400,000 home saves you $333/month in mortgage payment — but ties up an extra $50,000 in equity you can't access without refinancing or selling. Most financial advisors suggest keeping 3–6 months of living expenses in savings after closing, which often argues against an aggressive down payment strategy.

Frequently asked questions

Does the bank's number equal what I should spend?

Not always. The bank tells you the maximum they'll lend — not what's comfortable for your lifestyle. Many buyers borrow less than the maximum to keep budget flexibility.

What's the 28/36 rule?

Lenders typically want your housing costs to stay under 28% of gross monthly income, and total debt (including housing) under 36%. These are guidelines, not hard limits.

Do I need to include property taxes in my budget?

Yes. Your real monthly cost includes principal, interest, taxes, insurance, and any HOA fees — often called PITI. Calculators that only show P&I give an incomplete picture.

This article is educational and general in nature. It is not financial advice. Your specific situation depends on factors not covered here — consult a licensed lender or financial professional.