Mortgage decision
How much house can I afford?
The number a lender approves and the number you can comfortably afford are often different. Here's the housing-ratio math behind both, and a worked example showing how income, debt, and down payment change the answer.
The decision in one line
Housing affordability comes down to a ratio: how much of your gross monthly income can safely go toward housing costs, after accounting for other debt. A common starting point caps housing payments around 28% of gross monthly income, with total debt (housing plus car loans, student loans, credit cards) around 36%. From that monthly budget, a target rate and loan term convert it into a maximum loan amount — and adding your down payment gives a target home price.
Worked example: two income levels
Both examples assume $450/month in existing debt, a $40,000 down payment, a 6.5% rate, and a 30-year term:
| $95,000/year income | $120,000/year income | |
|---|---|---|
| Monthly housing budget | $2,216.67 | $2,800.00 |
| Estimated loan amount | $350,701 | $442,990 |
| Total home price (with down payment) | $390,701 | $482,990 |
A roughly 26% increase in income (from $95,000 to $120,000) translates into a roughly 24% larger affordable home price, holding debt, down payment, rate, and term constant. Existing debt has an outsized effect in the other direction — every dollar of existing monthly debt payment reduces the housing budget dollar for dollar under a fixed total-debt ratio, so paying off a car loan or credit card before house-hunting can meaningfully raise what you can afford.
What the estimate leaves out
This is a debt-to-income estimate, not a lender's full underwriting decision — actual approval also depends on credit score, employment history, cash reserves, and the specific lender's guidelines, all of which vary. It also doesn't include property tax, homeowner's insurance, HOA dues, or maintenance, which typically add hundreds of dollars a month on top of principal and interest. Add a realistic estimate of these for your target area before treating the estimated loan amount as your real budget ceiling.
How to decide
- Calculate your monthly budget at both a 28% and a more conservative ratio (some buyers prefer 25% for more margin) to see the range.
- Add a realistic property tax, insurance, and maintenance estimate for your target area on top of the calculated mortgage payment.
- Compare the estimated loan amount to your actual take-home (net) budget, not just the gross-income ratio.
- Get a real pre-approval from a lender to see their number — then decide independently whether you want to spend up to that limit or stay below it.
- Factor in how a down payment increase (even a modest one) changes the required loan amount and monthly payment.
Run your own affordability numbers ↗ Estimate the monthly payment ↗
Frequently asked questions
- How much house can I afford?
- A common starting rule caps housing costs at around 28% of gross monthly income, and total debt (housing plus other loans) at around 36%. Lenders will often approve more than this, but the ratio is a starting point for what you can afford comfortably, not just what you can qualify for.
- Is the amount a lender approves me for the amount I should spend?
- Not necessarily. Lender pre-approval is based on debt-to-income ratios that leave little room for savings, maintenance, or a rate change if your loan is adjustable. Many buyers who spend right up to their approval limit find the housing budget tight. Consider your target amount separately from the maximum you qualify for.
- Does the affordability estimate include property tax and insurance?
- The site's affordability calculator estimates a loan amount and monthly housing budget from your income, existing debt, and target rate/term. Property tax, homeowner's insurance, HOA fees, and maintenance vary widely by location and should be added to your own budget on top of the estimated mortgage payment.
- Should I use my gross or net income for affordability math?
- Standard housing-ratio guidelines (like the 28/36 rule) use gross income before tax, since that's the convention lenders use. But your real monthly cash flow is based on net income after tax and other deductions — it's worth sanity-checking any affordability number against your actual take-home budget.
- What raises how much house I can afford?
- A larger down payment reduces the loan amount needed. A lower interest rate reduces the monthly payment on the same loan amount. Paying down other debt lowers your debt-to-income ratio, which affects both what a lender will approve and how much housing payment fits comfortably in your budget.
Source note: Figures above are computed illustrations from entered assumptions, not a lender pre-approval. All calculations happen in your browser — nothing you enter is sent to a server or stored. This is educational financial information, not a recommendation about how much to spend on a home.