How Much House Can I Afford?

The most expensive mistake in home buying is letting the bank decide your budget. Lenders approve you for the most they can safely lend — not the amount that leaves room for the rest of your life. The good news is you can work out a comfortable budget yourself in a few minutes.

Start with the 28/36 rule

The classic guideline has two parts. Your housing costs should stay under 28% of your gross monthly income, and your total debt payments (housing plus car loans, student loans, and credit cards) should stay under 36%. These are ceilings, not targets — staying comfortably below them is what gives you breathing room.

• Front-end ratio: monthly housing cost ÷ gross monthly income ≤ 28%
• Back-end ratio: all monthly debt ÷ gross monthly income ≤ 36%
• Lenders may allow higher, but higher means tighter monthly cash flow

Housing cost is more than the mortgage

A common error is budgeting only for principal and interest. Your real monthly housing cost also includes property taxes, home insurance, and — if your down payment is under 20% — mortgage insurance. In many areas, taxes and insurance add 20–30% on top of the base payment, so a payment that looks affordable on paper can stretch you once everything is included.

The down payment changes everything

A larger down payment lowers the amount you finance, reduces your monthly payment, and — once you reach 20% — removes mortgage insurance. It also lowers the total interest you pay over the life of the loan. If you are close to 20%, it is often worth waiting a few months to get there.

Do not forget the upfront and ongoing extras

Beyond the monthly payment, budget for closing costs (typically a few percent of the price), moving costs, and a maintenance reserve. A widely used rule is to set aside about 1% of the home value per year for repairs and upkeep. Owning is rarely as cheap as the headline payment suggests.

A simple way to find your number

Work backward: take 28% of your gross monthly income, subtract estimated taxes, insurance, and any mortgage insurance, and what remains is roughly what you can spend on principal and interest. Convert that into a loan amount at current rates, add your down payment, and you have a realistic price range. Our affordability calculator does this math for you in one step.

Rent vs buy first

If you might move within a few years, buying does not always win — closing costs and selling fees can outweigh the equity you build. It is worth comparing the true monthly and multi-year cost of buying against renting before you commit.

Affordability is personal. The right number is the one that covers the home plus taxes, insurance, maintenance, and the rest of your goals — comfortably, not just on paper.