How Much House Can I Afford? The Honest Math
If you've ever used a lender's "how much can I afford?" calculator, you've probably walked away with a number that felt too high. That's not a coincidence. Lenders are optimizing for the largest loan they can legally give you — not the largest loan that leaves you with a life outside your mortgage payment.
This guide walks you through the three standard affordability rules, explains what each one actually means, and shows you how to pick the right one for your situation. Every number here is grounded in the same math that mortgage underwriters use.
The 28/36 rule (the conservative benchmark)
The 28/36 rule has been the gold standard in personal finance for decades. It says:
- 28% of gross monthly income should go to housing (PITI + HOA).
- 36% of gross monthly income should go to total debt, including housing plus car loans, student loans, credit cards, and alimony.
On a $120,000 salary ($10,000/month gross), that's $2,800/month for housing and $3,600/month for total debt. If you already have $500/month in other debt payments, your housing budget shrinks to $3,100/month.
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Our Affordability tab shows you conservative, recommended, and aggressive budgets simultaneously.
Try the Affordability Calculator →DTI ratios: what lenders actually approve
Underwriters use two DTI (debt-to-income) numbers: your front-end DTI (housing only) and your back-end DTI (total debt). Conventional loans typically max out around 43% back-end DTI. FHA loans can stretch to 50%. VA loans have no hard DTI cap but still evaluate "residual income."
That means on $120,000 of income, a lender might approve you for $4,300/month of total debt payments — $1,500/month more than the conservative rule allows. That delta is exactly where most buyers get into trouble.
Why the bank's maximum is not your maximum
Lenders don't care about three things that you should absolutely care about:
- Retirement contributions. Putting 15% of gross income into a 401(k) leaves you with ~75% of gross as take-home pay, not 100%. The 28% rule on gross income becomes closer to 37% of take-home pay.
- The "hidden" costs of homeownership. Maintenance typically runs 1–2% of home value per year. Utilities jump when you move from an apartment to a house. New furniture for bigger rooms adds up.
- Lifestyle and life events. Daycare, travel, a new car, a parent needing care — none of this is on your mortgage application, but all of it is on your budget.
Worked examples by income
| Gross income | Conservative (28%) | Recommended (36% DTI) | Max lender (43% DTI) |
|---|---|---|---|
| $60,000 | $1,400/mo PITI | $1,800/mo PITI* | $2,150/mo PITI* |
| $100,000 | $2,333/mo PITI | $3,000/mo PITI* | $3,583/mo PITI* |
| $150,000 | $3,500/mo PITI | $4,500/mo PITI* | $5,375/mo PITI* |
| $200,000 | $4,667/mo PITI | $6,000/mo PITI* | $7,167/mo PITI* |
From monthly payment to home price
The conversion from "monthly budget" to "home price" depends on your interest rate, down payment, and local property taxes. Here's a quick mental model at 7% interest, 20% down, and typical tax/insurance (~1.5% of home value annually):
- $2,000/month PITI ≈ $260,000 home
- $3,000/month PITI ≈ $390,000 home
- $4,000/month PITI ≈ $515,000 home
- $5,000/month PITI ≈ $645,000 home
Drop the rate by 1 point (to 6%) and each of those home prices goes up roughly 8–10%.
The savings-rate test
Here's the rule personal-finance writers don't put on billboards: after your new mortgage, can you still save 15%+ of gross income for retirement? If yes, you can probably afford the house. If no — even if the lender approves you — the house will slowly bleed your future.
A quick way to check: add your prospective mortgage payment to your current rent, subtract your current rent, and ask whether you could pay that delta every month without cutting retirement savings. If the answer is a comfortable yes, proceed. If it's "maybe if we cut back," slow down.
Emergency fund check
Before closing on a house, have 3–6 months of the new (higher) housing payment sitting in cash. Closing costs, move-in repairs, and the first big appliance failure will eat a surprising amount of cash in the first six months.
What about the "house poor" scenario?
"House poor" is what happens when your housing payment is technically affordable on paper but doesn't leave room for anything else. The telltale signs: no vacation in three years, credit card balances creeping up, you skip HVAC maintenance because it's "not urgent." Avoid this by aggressive testing before purchase — not after.
Bottom line
Start with the conservative 28% rule. Use the bank's max only as a ceiling — never as a target. Build in a margin for retirement contributions, maintenance (budget 1.5% of home value per year), and life. If the house you want requires the lender's maximum, it's almost always the wrong house — or the wrong time.
Get a personalized number
Our affordability calculator shows all three scenarios — conservative, recommended, aggressive — at once.
Calculate What You Can Afford →FAQ
Is the 28/36 rule outdated?
In high-cost areas (coastal cities), 28% is extremely difficult to hit. Many buyers comfortably go up to 32–35% front-end if they have low other debt and good job stability. But 40%+ is where affordability genuinely breaks for most households.
Should I use gross or net income?
Lenders use gross. For your own budget, run the math on take-home pay — it's more realistic.
Does my credit score affect how much house I can afford?
Indirectly, yes — a better score gets you a lower rate, which lets you afford more house at the same monthly payment. A 100-point credit-score jump can move your buying power by 5–10%.
What about FHA and VA loans?
FHA allows DTI up to 50% but requires mortgage insurance for the life of the loan. VA loans have flexible DTI and no PMI but require eligible military service. Both are legitimate paths that the 28/36 rule can be loosened for — but "allowed" is not the same as "wise."