Buying a home is one of the most exciting — and expensive — decisions you’ll make. However, before you start browsing listings or talking to agents, it’s essential to ask a key question: how much house can I afford?
This guide breaks down how lenders calculate affordability, how you can estimate your own budget, and how to avoid becoming “house poor” in the process.
What Does “House Poor” Mean?
Being house poor means you’re spending so much on your mortgage and housing expenses that there’s little left for savings, emergencies, or even everyday living.
Lenders may approve you for a larger mortgage than is truly comfortable for your lifestyle. For this reason, it’s critical to look beyond what you can borrow and focus on what fits within your personal budget.
How Do Lenders Calculate How Much House You Can Afford?
Most lenders use the 28/36 rule, a general guideline for mortgage approval:
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28% Rule: Your monthly housing costs (including principal, interest, taxes, and insurance) should not exceed 28% of your gross monthly income.
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36% Rule: Your total monthly debt payments — including housing, student loans, car payments, and credit cards — should not exceed 36% of your gross income.
As a result, these ratios help ensure your mortgage doesn’t interfere with your ability to manage other financial obligations.
Affordability Example: Breaking It Down
Let’s say you earn $75,000 per year, which equals $6,250 per month before taxes.
Using the 28% rule:
$6,250 × 0.28 = $1,750
→ You can afford about $1,750/month in total housing costs.
If you have no other debt, this could translate to a mortgage of approximately $275,000–$325,000, depending on your interest rate, down payment, and loan term. However, your affordability may shift if you carry other monthly obligations.
Affordability by Income: Sample Ranges
| Annual Income | Max Monthly Housing (28%) | Estimated Home Price Range |
|---|---|---|
| $40,000 | $933 | $140,000 – $170,000 |
| $50,000 | $1,167 | $175,000 – $210,000 |
| $60,000 | $1,400 | $200,000 – $240,000 |
| $75,000 | $1,750 | $275,000 – $325,000 |
| $85,000 | $1,983 | $300,000 – $360,000 |
| $100,000 | $2,333 | $350,000 – $425,000 |
| $120,000 | $2,800 | $425,000 – $500,000 |
| $150,000 | $3,500 | $550,000 – $650,000 |
| $175,000 | $4,083 | $625,000 – $725,000 |
| $200,000 | $4,667 | $700,000 – $800,000 |
Estimates assume a 30-year fixed-rate mortgage at 7% interest, with average property taxes and homeowners insurance included.
How Much Mortgage Can I Afford Based on DTI?
Your Debt-to-Income (DTI) ratio plays a major role in how much house you can afford. Most lenders look for:
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Front-end DTI (housing only): ≤ 28%
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Back-end DTI (housing + all other debts): ≤ 36–43%
If you have large monthly debt obligations — such as car loans or student loans — your maximum loan amount may be reduced, even with a solid income. Therefore, paying down debt before applying can be beneficial.
Use an Affordability Calculator to Estimate Your Budget
Rather than guessing, use our Loan Affordability Calculator to input your income, debts, down payment, and other key financial details. You’ll get:
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A realistic monthly payment estimate
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A target home price range
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Your max DTI based on current guidelines
Even so, tools like these offer only a starting point. They don’t account for your lifestyle, savings goals, or long-term financial plans.
Factors That Affect Affordability
Besides income and debt, several other elements play a role in how much house you can afford.
Down Payment
A larger down payment lowers your loan amount and monthly payment. In addition, putting down 20% or more may eliminate PMI altogether.
Interest Rate
Even a minor rate change can shift your affordability range. As a result, using up-to-date tools (like those that incorporate OBMMI data) is essential.
Loan Term
A 30-year mortgage offers lower payments, while a 15-year loan reduces interest but raises monthly obligations.
Property Taxes & Insurance
Where you buy matters — some states and cities have significantly higher tax rates. Therefore, always include taxes and insurance in your affordability estimates.
How Loan Type Affects Affordability
Not all mortgage programs are created equal — and the one you choose can significantly affect your buying power.
FHA Loans
FHA loans require just 3.5% down, which can be helpful for buyers with limited savings. However, they also include monthly MIP for the life of the loan.
Best for buyers with lower credit scores or limited cash reserves.
Learn More: A beginners guide to FHA Loans
VA Loans
VA loans offer 0% down and no PMI, which significantly reduces monthly costs. That makes them one of the most affordable loan types for eligible veterans.
Best for active-duty military, veterans, and eligible spouses.
Learn More: A beginners guide to VA Loans
Conventional Loans
These require 5%–20% down and offer flexibility, especially for buyers with strong credit. PMI can be removed once you reach 20% equity.
Best for financially stable buyers with solid credit profiles.
Learn More: A beginners guide to Conventional Loans
Loan types also come with different underwriting guidelines — so your maximum loan approval amount may vary between programs.
Budgeting Beyond the Mortgage
Affordability doesn’t stop when your offer is accepted. In fact, many homebuyers are surprised by the ongoing costs of ownership.
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Maintenance & Repairs: Experts recommend budgeting at least 1% of your home’s value annually for repairs and upkeep.
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Utilities: Heating, cooling, water, and electricity typically cost more than in a rental.
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Furnishing & Appliances: New window treatments, furniture, and appliances can quickly add up — especially in larger homes.
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Emergency Fund: A strong emergency fund is essential. Ideally, you should have 3–6 months of living expenses set aside after closing.
Ultimately, if you’re not saving at least 10% of your income post-purchase, it might be worth scaling back your budget.
Should You Buy at the Max Amount You’re Approved For?
Not necessarily.
While lenders may approve you for a sizable mortgage, that doesn’t mean it’s wise to stretch your budget. In fact, doing so can increase financial stress and limit flexibility.
Before maxing out your pre-approval, consider:
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How much you’re saving for retirement
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Whether your job is stable
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Lifestyle factors like travel, childcare, or future plans
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How comfortable you’d feel with unexpected expenses
Buying slightly below your maximum allows room to breathe — and that peace of mind is often worth more than extra square footage.
How to Improve How Much House You Can Afford
If you’re hoping to afford more home — or reduce your monthly payments — try these steps:
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Increase your down payment to lower your loan size
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Pay off debt to reduce your back-end DTI
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Boost your credit score to qualify for lower interest rates
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Compare lenders to find the best possible rate
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Choose a longer loan term if monthly affordability is your priority
Even so, make sure to weigh monthly flexibility against long-term interest savings.
Read More: How to increase your mortgage pre-approval amount
Rent vs. Buy — Is Now the Right Time?
If you’re still weighing the decision to buy, consider this quick side-by-side comparison:
| Renting | Buying |
|---|---|
| Lower upfront costs | Builds equity over time |
| Easier to relocate | More stable monthly payments (fixed-rate) |
| No maintenance responsibilities | Full control over improvements and repairs |
| No equity or return on payments | Potential appreciation + tax benefits |
Still unsure? Use this Rent vs. Buy calculator to explore what makes more sense based on your budget, location, and goals.
Frequently Asked Questions (FAQs)
What percentage of my income should go to a mortgage?
Ideally no more than 28% of your gross monthly income. Including other debts, aim to keep your total DTI below 36%–43%.
How do lenders determine how much house I can afford?
Lenders use your gross income, current debts, credit score, and down payment to calculate DTI and pre-approval limits.
Can I afford more than my pre-approval?
Yes, but it’s not advised. Lenders don’t account for your full budget or lifestyle expenses — only your credit and debt.
Do I need a 20% down payment to buy a home?
No. FHA loans require as little as 3.5%, and some programs (VA, USDA) offer zero-down options. However, <20% may require PMI.
Can I afford a home with student loan debt?
Yes — as long as your total DTI (including your student loans) remains under 43%. Federal loans with income-driven payments can help.
Can I afford a home on one income?
Absolutely. Many buyers qualify solo. Just make sure your income covers housing, debts, and living expenses without strain.
What’s the best way to save for a down payment?
Set up an automatic savings plan, reduce discretionary spending, and consider high-yield savings accounts or CD ladders.
Final Thoughts
Understanding how much house you can afford isn’t just about qualifying for a mortgage — it’s about building a life you can sustain.
By calculating your DTI, estimating monthly payments, and using smart tools like our Loan Affordability Calculator, you can shop with confidence — and avoid becoming house poor.
Take your time, stay within your comfort zone, and choose a home that fits your finances and your future.
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