How Much House Can You Actually Afford?

The amount a lender approves you for and the amount you can comfortably afford are two very different numbers. Borrowing to the max is how people end up house-poor. Here is how to find a payment that leaves room to actually live.

The 28/36 rule

A long-standing guideline: keep your total housing payment at or below 28% of your gross monthly income, and all your debt payments (housing plus car, student loans, credit cards) at or below 36%. These are ceilings, not targets, and many people are happier well below them.

The payment is more than principal and interest

A mortgage payment has four parts, often called PITI: principal, interest, property taxes, and homeowners insurance. If your down payment is under 20%, add private mortgage insurance (PMI). Property taxes and insurance vary widely by location and can add hundreds a month, so a "cheap" mortgage in a high-tax area may not be cheap at all.

Don't forget the costs lenders ignore

Lenders qualify you on the loan payment, not on the true cost of owning. Budget for maintenance (a common rule is about 1% of the home's value per year), utilities (usually higher than renting), HOA dues, and furnishing. These do not show up in an approval letter but they hit your wallet every month.

Why borrowing the max is risky

Maxing out your approval leaves no cushion for a job loss, a rate change on the rest of your debt, or a big repair. A payment that felt fine on paper can become suffocating after an unexpected expense. Aiming below your ceiling buys peace of mind and flexibility.

Work from the payment, not the price

Decide what monthly payment fits your budget comfortably first, then work backward to a price range. That is the reverse of how most people shop, and it is far healthier financially.

Find your comfortable range with our home affordability calculator.