How Much House Can I Afford? A Realistic Guide

The 28/36 Rule Explained

Most lenders follow the 28/36 rule when deciding how much you can borrow. Your monthly housing costs — mortgage principal, interest, taxes, and insurance (PITI) — should not exceed 28% of your gross monthly income. Your total monthly debt payments (housing plus car loans, student loans, credit cards) should stay below 36%.

For example, if your household earns $6,000 per month before taxes, your maximum housing payment is $1,680 (28%) and your total debts should stay below $2,160 (36%).

What Lenders Actually Look At

Your maximum approval depends on four key factors:

Debt-to-Income Ratio (DTI): The percentage of gross income consumed by monthly debt. Below 36% is ideal; above 43% usually disqualifies you for conventional loans.
Credit Score: Scores above 740 get the best rates. Each 20-point drop can add 0.25–0.5% to your interest rate, translating to tens of thousands more over 30 years.
Down Payment: Putting down 20% eliminates Private Mortgage Insurance (PMI), which typically costs 0.5–1% of the loan amount annually.
Employment History: Lenders prefer two years of stable income in the same field.

Hidden Costs Most Buyers Forget

The mortgage payment is just the beginning. Budget an additional 1–3% of the home's value annually for maintenance and repairs. Other recurring costs include:

Property taxes: Vary wildly — from 0.3% in Hawaii to over 2% in New Jersey and Illinois.
Homeowner's insurance: $1,200–$2,500/year depending on location and coverage.
HOA fees: $200–$400/month is common for condos and planned communities.
Utilities: Often higher than renting, especially for larger homes.

A More Conservative Approach

Financial advisors often recommend spending no more than 25% of take-home pay on housing. This leaves more room for retirement savings, emergency funds, and lifestyle expenses. Being house-poor — owning a home you can barely afford — is one of the most common financial traps.

Run Your Own Numbers

Use our Mortgage Affordability Calculator to see exactly how much house fits your budget. Pair it with the Mortgage Calculator to compare monthly payments across different loan amounts and rates, or try the Rent vs. Own Calculator to see whether buying makes financial sense for your situation.