How Much House Can You Afford?
Falling in love with a house is easy; knowing what you can actually afford is the hard part. Lenders and buyers often arrive at very different numbers, and the gap is where financial stress lives. Here's how to find a price that fits your real life, not just the maximum a bank will approve.
The 28/36 rule
A long-standing lender guideline says your monthly housing payment shouldn't exceed about 28% of your gross monthly income (the front-end ratio), and your total debt — housing plus car loans, student loans, and credit cards — shouldn't exceed about 36% (the back-end ratio). Staying under both lines keeps you in the comfortable zone that lenders like and that your budget can sustain.
What the payment actually includes
The number that matters isn't just principal and interest. Your real monthly cost — often called PITI — adds property taxes, homeowners insurance, private mortgage insurance if your down payment is under 20%, and any HOA fees. Two homes at the same price can have very different monthly costs depending on local taxes and insurance.
Why your max isn't your target
Lenders approve you for the most you can technically pay, not the amount that leaves room for savings, repairs, and life. Buying below your maximum is one of the simplest ways to avoid becoming "house poor," where the home payment crowds out everything else.
Run your numbers
Start with the home affordability calculator to estimate a price range from your income, debts, and down payment. Then check your debt-to-income ratio — the first thing a lender looks at — and use the mortgage calculator to see the monthly payment at different prices and rates.
Educational information only — not financial, tax, or investment advice.