How Much House Can I Afford? A Guide Based on Income and Debt
Estimate a realistic home budget using your income, monthly debts, down payment, and the full monthly cost of owning a home, not just the loan payment.
Quick comparison
Estimate a realistic home budget using your income, monthly debts, down payment, and the full monthly cost of owning a home, not just the loan payment. The right choice depends on the loan purpose, credit profile, income stability, repayment timeline, and how much risk a borrower is willing to accept.
28% housing guideline
A common rule of thumb keeps total housing costs (principal, interest, taxes, insurance, and HOA dues) at or below about 28% of gross monthly income.
36% total debt guideline
The same rule keeps all monthly debt payments, including the new mortgage, car loans, student loans, and card minimums, near or below about 36% of gross income.
Lender DTI limits
Many lenders approve higher debt-to-income ratios, often up to the mid-40s or higher for some conventional and FHA loans with strong compensating factors. Approval does not mean the payment is comfortable.
Example: $90,000 income
Gross monthly income is $7,500. At 28%, housing costs would be about $2,100 a month. At 36%, all debts combined would be about $2,700, so $600 of other debt payments still fits.
Down payment
A larger down payment lowers the loan amount and monthly payment. Putting less than 20% down on a conventional loan usually adds private mortgage insurance (PMI).
Cash to close
Closing costs often run about 2% to 5% of the loan amount, on top of the down payment. Lenders may also want to see cash reserves left over after closing.
How to evaluate this option
Borrowers should compare offers using the full cost of credit. That means reviewing APR, required fees, repayment term, monthly payment, total interest, late-payment policy, prepayment rules, and whether the loan is secured by an asset.
Provider type also matters. Banks may reward existing relationships, credit unions may offer member-focused pricing, online lenders may provide fast quotes, and government-backed programs may offer unique benefits for eligible borrowers.
Key takeaways
- Budget for the full monthly cost: principal, interest, property taxes, homeowners insurance, PMI or mortgage insurance, and HOA dues.
- Calculate your debt-to-income ratio before house hunting so you know what a lender is likely to see.
- Your comfortable budget can be lower than your approved amount. Leave room for savings, repairs, and emergencies.
- Small rate differences change affordability a lot, so get quotes from several lenders on the same day.
- First-time buyers may qualify for state or local down payment assistance programs.
Provider examples to compare
These examples are starting points for research, not endorsements or guaranteed approvals. Availability, rates, fees, underwriting, and state coverage can change.
Risks and cautions
- Do not stretch to the maximum approval amount if it leaves no emergency savings.
- Property taxes and insurance can rise after you buy, which increases an escrowed payment.
- Plan for maintenance and repairs; many owners set aside around 1% of the home's value per year.
- Avoid opening new credit or making large purchases between preapproval and closing.