Guides
How much house can I afford?
The honest answer is rarely the biggest loan a bank will approve. Here is how to find a number you can actually live with, and the rules lenders use to set the ceiling.
Start with the 28/36 rule
Most lenders lean on a simple guideline. Your housing payment should stay under 28% of your gross monthly income, and all your debt payments together (housing, car, student loans, credit cards) should stay under 36%. These two limits are the front-end and back-end ratios.
For example, on a $6,000 monthly income, 28% is $1,680 for housing and 36% is $2,160 for total debt. If you already pay $400 toward a car and loans, that leaves about $1,760 for housing under the back-end rule, so the 28% front-end limit of $1,680 is what actually binds.
Your down payment changes everything
A larger down payment shrinks the loan, lowers the monthly payment, and reduces the total interest you pay over the life of the mortgage. Putting down 20% or more also lets you skip private mortgage insurance (PMI), which can add a noticeable amount to the monthly bill. Even a few percentage points more upfront can move your affordable price range meaningfully.
Debt-to-income is the number lenders watch
Your debt-to-income ratio (DTI) is your total monthly debt payments divided by your gross monthly income. Lenders use it to judge risk, and a lower DTI usually unlocks better rates. Paying down a credit card or car loan before you apply can do more for your buying power than a small change in the home price.
Remember the costs beyond principal and interest
The mortgage payment is only part of owning a home. Budget for:
- Property taxes and home insurance, often collected monthly with your payment.
- HOA fees, if your home has them.
- Maintenance, commonly estimated at about 1% of the home's value per year.
The mortgage calculator has fields for taxes, insurance, and HOA so you can see the full monthly cost, not just principal and interest.
A sensible way to land on a number
Work backward. Decide the monthly payment you are comfortable with, keep it under 28% of gross income, then use the calculator to find the home price that produces it at today's rates. Comparing a shorter loan term is worth a look too: a 15-year mortgage costs more per month but saves a large amount of interest.