How Much House Can I Afford? Home Affordability Guide

I Almost Bought a House I Couldn't Afford

About three years ago, I was pre-approved for somewhere around 380,000 and I remember thinking, "Great, that's my budget." It wasn't. Not even close. The pre-approval number is what the bank is willing to lend you — it's not what you can actually, comfortably afford. Those are two wildly different things, and I had to learn that the hard way by sitting down with a spreadsheet and realizing my monthly payment at that price would've eaten roughly 45% of my take-home pay.

That's a recipe for being house-poor.

So I pulled back, ran the real numbers, and ended up buying at 285,000 instead. Best decision I've made. I can still travel, save, and — honestly — sleep at night. The whole experience is why I built the tools on this site, because the math matters more than the marketing from your lender.

The 28/36 Rule (And Why It's Only a Starting Point)

You've probably heard of the 28/36 rule. Basically, it says your monthly housing costs shouldn't exceed 28% of your gross monthly income, and your total debt payments (housing plus car loans, student loans, credit cards, all of it) shouldn't exceed 36%. Most lenders use some version of this, though plenty of them will happily approve you way beyond it.

So if your household pulls in about 90,000 a year, that's 7,500 per month gross. Multiply by 0.28 and you get 2,100. That's your ceiling for the mortgage payment plus taxes plus insurance. Not just the mortgage — the whole package.

But here's the thing — 28% of gross income might still feel tight depending on where you live and what your other expenses look like. I know people in high cost-of-living areas who spend 32% and feel fine, and I know people in cheaper markets who spend 22% and still feel stretched because they've got daycare costs or whatever. The rule is a guardrail, not gospel.

The 36% side matters too. If you're already paying 800 a month toward student loans and a car payment, that eats into what you can put toward housing. A lot of first-time buyers forget this part entirely.

Running the Real Numbers: A Worked Example

Let me walk through a specific scenario because abstract percentages don't mean much until you attach them to actual dollars.

The situation: You and your partner earn a combined 105,000 per year. You've saved 40,000. You have a car payment of 350 per month and no other debt. You're looking at a 30-year fixed mortgage at about 6.8% interest.

Factor	Amount
Gross Monthly Income	8,750
Max Housing Payment (28%)	2,450
Max Total Debt (36%)	3,150
Existing Monthly Debt	350
Remaining for Housing (36% rule)	2,800
Down Payment Saved	40,000
Estimated Purchase Price Range	310,000 – 340,000

Both rules give you a housing payment somewhere between 2,450 and 2,800. I'd personally target the lower end — around 2,450 — because property taxes and insurance have this annoying tendency to creep up year after year. And your escrow payment adjusts with them.

With 40,000 down on a 300,000 home, you're borrowing 260,000 (or a bit more if you're not hitting 20% down and need PMI). At 6.8%, your principal and interest alone runs about 1,695 per month. Add in property taxes (let's say 250 a month) and homeowner's insurance (maybe 130 a month) and you're at roughly 2,075. That's under your 28% threshold. Comfortable.

Bump that purchase price to 370,000 and suddenly you're borrowing 330,000, your P&I jumps to around 2,150, and with taxes and insurance you're pushing 2,550 or more. Still technically under the 36% limit, but now you're right at the edge of the 28% rule and you haven't even factored in maintenance, which — trust me — is not optional.

Use our

to plug in your own numbers and see where you land.

What People Forget to Include

The mortgage payment is not your housing cost. I can't say this loudly enough.

Here's what actually goes into owning a home each month, and most online calculators (not ours, but most) skip at least half of these:

• Principal and interest — the obvious one
• Property taxes, which vary wildly by state and county
• Homeowner's insurance
• PMI if you put less than 20% down (this can be 80-150 a month, easily)
• HOA fees — some neighborhoods hit you with 200-400 a month for this
• Maintenance and repairs — the general rule of thumb is about 1% of the home's value per year, so a 300,000 house means budgeting 3,000 annually or 250 a month
• Utilities, which tend to be higher than renting because, well, houses are bigger

I ran a rental property analysis last year on a duplex listed at 275,000 and the cap rate looked great on paper — somewhere around 7.2% — until I factored in the actual insurance quote (which was 40% higher than the listing agent estimated) and the deferred maintenance the inspector flagged. Real numbers told a different story. Same principle applies to your primary residence. The sticker price is just the beginning.

If you're also weighing whether to rent or buy, our

breaks that comparison down pretty clearly. And for getting a handle on the monthly payment itself, try the

.

Down Payment Strategy Actually Matters

Putting 20% down is the classic advice, and it's good advice — you avoid PMI, you get better rates, you start with more equity. But it's not always realistic, especially in markets where starter homes are 350,000 and up.

FHA loans let you put as little as 3.5% down. Some conventional programs go as low as 3%. The tradeoff is PMI and a higher monthly payment, which circles right back to affordability.

I've seen people drain their entire savings to hit 20% and then have nothing left for closing costs, moving expenses, or that inevitable first repair. Don't do that. A healthy emergency fund after closing — I'd say at least 3-6 months of expenses — is more important than dodging PMI. You can always refinance later to drop it.

Our

helps you figure out how different down payment amounts change your monthly picture. And if you want to understand how extra payments could shorten your loan, the

is worth playing with too.

For property investors specifically — if you're thinking about this purchase as a future rental — you'll want to check the

and the

before committing. I've analyzed deals where the cash-on-cash return looked like 9% until I ran the real operating expenses through, and it dropped to 4%. The math doesn't lie, but it does hide if you let it.

Is the bank's pre-approval amount the same as what I can afford?

No, and this is probably the most common mistake I see. The bank's pre-approval tells you the maximum they'll lend based on your credit, income, and debt. It doesn't account for your lifestyle, your savings goals, your kids' activities, or the fact that you like eating out three times a week. I was pre-approved for about 95,000 more than what I ended up comfortably buying. Treat the pre-approval as an upper ceiling you probably shouldn't touch.

How much should I budget for maintenance on a new home?

The 1% rule is a decent starting point — budget about 1% of the home's purchase price per year. So for a 320,000 home, that's roughly 3,200 a year or about 267 per month. Newer homes might need less in the first few years; older homes almost always need more. I budget 1.5% on anything built before 1990, just to be safe.

Does the 28/36 rule use gross or net income?

Gross — meaning your income before taxes and deductions. Which is honestly why a lot of people feel squeezed even when they're "within the guidelines." If you want a more conservative (and realistic) approach, try running the 28% calculation against your net take-home pay instead. You'll end up with a lower number, but you'll also end up with a budget that actually feels manageable.