How Much House Can I Afford?
One of the most common - and most important - questions home buyers ask is, “How much house can I afford?” The answer is not just a home price or a loan approval amount. True affordability is about finding a monthly housing payment that fits your income, debts, lifestyle, and long-term financial goals.
This guide takes a budget-first approach to mortgage affordability. You’ll learn how lenders calculate affordability, how to set a realistic monthly housing budget, how to convert that budget into a safe home price, and how to avoid the mistakes that cause buyers to feel “house poor.”
Start With a Monthly Housing Budget (Not a Home Price)
Many buyers start by asking what home price they qualify for, but this is the wrong place to begin. A smarter approach is to decide what monthly mortgage payment you can comfortably afford while still saving, investing, and enjoying your life.
Your housing payment competes with everyday expenses like groceries, transportation, utilities, childcare, travel, and retirement savings. Just because a lender approves a payment doesn’t mean it fits your personal budget.
A mortgage affordability calculator can help you estimate a safe monthly range before translating that payment into a home price.
Use our mortgage affordability calculator to set a realistic starting point
What Lenders Look At When Deciding How Much You Can Afford
Mortgage lenders evaluate affordability through a risk-based lens. Their goal is to determine whether you can reliably repay the loan - not whether the payment fits your lifestyle.
- Gross monthly income
- Existing monthly debts
- Debt-to-income ratio (DTI)
- Credit profile
- Down payment and cash reserves
- Loan program requirements
Debt-to-Income Ratio (DTI)
DTI measures how much of your gross monthly income goes toward debt payments, including your future mortgage. While many conventional loans allow DTIs up to around 45%, lower ratios generally lead to better approval odds and lower stress.
The 28/36 Rule: Helpful Guideline or Outdated Advice?
A common rule of thumb says you should spend no more than 28% of gross income on housing and no more than 36% on total debt. This guideline can be useful as a starting point, but it doesn’t account for real- world variables like taxes, insurance, childcare, or lifestyle goals.
In high-tax areas or HOA communities, buyers following the 28/36 rule may still feel stretched. In lower-cost regions, buyers may feel comfortable below these limits.
What “Affordable” Really Includes (PITI Explained)
A mortgage payment is more than principal and interest. True affordability must include the full housing cost, often referred to as PITI.
- Principal: Loan balance repayment
- Interest: Cost of borrowing
- Taxes: Property taxes, usually escrowed
- Insurance: Homeowners insurance
Many buyers also pay mortgage insurance (PMI or MIP) and HOA dues, which must be included when evaluating affordability.
Estimate your full PITI using our mortgage payment calculator
How to Calculate How Much House You Can Afford (Step-by-Step)
- Decide on a comfortable monthly housing payment
- Subtract non-housing debts
- Estimate taxes, insurance, and HOA dues
- Choose a loan term and interest rate
- Convert payment into a home price range
- Stress-test for future increases
Real-World Examples of Mortgage Affordability
Two buyers with the same income can afford very different homes depending on debt, taxes, and loan structure.
- $80,000 income with a car payment
- $120,000 household income with student loans
- First-time buyer using FHA financing
- VA borrower with residual income advantage
FHA vs VA vs Conventional: How Loan Type Affects Affordability
- FHA: Lower down payment, higher insurance costs
- VA: Residual income focus, no PMI
- Conventional: PMI removable at lower LTV
Common Mistakes That Make Buyers Overestimate Affordability
- Ignoring taxes and insurance
- Using max approval as a budget
- Forgetting HOA dues
- Underestimating maintenance
- Skipping rate stress tests
Which Calculator Should You Use Next?
- Affordability calculator - set your budget
- DTI calculator - qualification check
- Mortgage payment calculator - scenario testing
- Amortization & payoff tools - long-term planning
Ready to Find a Home You Can Truly Afford?
Start with your monthly budget, then use our calculators to translate that number into a realistic home price - without sacrificing your financial future.
Calculate My Home Affordability