How much house can I actually afford?

Short answer: two numbers, and you want the smaller one

There are two honest answers to "how much house can I afford," and they are almost never the same.

The approval number is what a lender will let you borrow. It comes almost entirely from one calculation: your debt-to-income ratio — the share of your gross monthly income that would go to debt payments, including the new mortgage. In 2026, a strong conventional file can be approved out to roughly 50% of gross income going to debt.

The comfortable number is what leaves you with a life. It's usually 10–25% below the approval number, because approval math uses your income *before* taxes, retirement contributions, childcare, groceries, or savings.

The rule that keeps people out of trouble: get pre-approved for the maximum so you know your ceiling, then shop at a price that keeps your total housing payment near 28% of gross income. The approval tells you what's possible. Your budget tells you what's wise.

What lenders actually count as your "payment"

When a lender talks about your monthly payment, they mean more than principal and interest. The industry shorthand is PITI (principal, interest, taxes, and insurance — the four pieces that make up a full monthly house payment, not just the loan itself), and at higher debt loads the non-loan pieces are what push a file over the line.

• P — Principal: the part that pays down what you borrowed.
• I — Interest: the lender's charge for the money.
• T — Taxes: annual property taxes, divided by twelve and collected monthly into an escrow account.
• I — Insurance: homeowners insurance, also escrowed monthly.
• Plus mortgage insurance if you put less than 20% down — PMI (private mortgage insurance — an extra monthly fee on conventional loans when you put down less than 20%; it protects the lender, not you, and can usually be removed later) on a conventional loan, MIP (mortgage insurance premium — the FHA version of mortgage insurance — an upfront fee plus a monthly fee added to your payment) on an FHA (Federal Housing Administration loan — a government-backed loan built for buyers with lower credit scores or smaller down payments) loan.
• Plus HOA (homeowners association — a neighborhood or condo group that charges a monthly or yearly fee and sets community rules; lenders count that fee in your payment) dues if the property has a homeowners association. These count in full, every month, and they are the single most common reason a buyer's approved price drops after they pick a condo.

Two homes at the same price can produce payments $500 apart once taxes, insurance, and HOA dues are counted. Always compare the full payment, never the loan amount.

The 28/36 rule, explained without jargon

The oldest affordability guideline in lending is still the most useful starting point.

• 28% — the housing ratio. Your total housing payment (PITI plus HOA) should be no more than 28% of your gross monthly income.
• 36% — the total debt ratio. Housing plus every other required monthly payment — car loans, student loans, credit-card minimums, personal loans, child support — should be no more than 36%.

A household earning $8,000 a month gross would target about $2,240 for housing and about $2,880 for all debt combined.

Modern automated underwriting will approve well past 36%. That doesn't make 28/36 wrong — it makes it the *comfort* line rather than the *approval* line. Buyers who stay near it almost never end up house-poor. Buyers who push to 50% are betting that nothing in their life gets more expensive.

How the lender's math really works (debt-to-income)

Here is the calculation an underwriter runs, step by step.

Step 1 — Gross monthly income. Before taxes. Salaried income is your annual salary divided by twelve. Hourly income is your average hours times your rate. Self-employment, commission, and bonus income are averaged over two years of tax returns, and a declining trend gets used at the lower number.

Step 2 — Monthly debt payments. Only payments that appear on your credit report or are legally required. That means car loans, student loans, credit-card minimums, personal loans, and court-ordered obligations like alimony or child support. It does not include groceries, utilities, phone bills, insurance premiums, or streaming subscriptions.

Step 3 — Add the proposed housing payment. Full PITI plus HOA.

Step 4 — Divide. Total monthly debt divided by gross monthly income equals your debt-to-income ratio.

Worked example: $8,000 gross income, a $450 car payment, $120 in card minimums, and a $2,200 proposed housing payment. Total debt is $2,770, which is about 35% of income. That's a comfortable file with real room left over.

Swap the car for a $900 truck payment and add a $400 student loan, and the same buyer is at 51% — over the automated cap, and the approved price has to come down by roughly $80,000–$100,000 to fix it.

The [affordability calculator](/affordability) runs this exact math on your numbers, and the [DTI (debt-to-income ratio — how a lender measures your monthly bills as a percentage of your monthly income before taxes) guide](/guides/dti-explained) explains the ratio in more depth.

The five things that move your number the most

If your approval came back lower than you hoped, these are the levers in order of power.

1. Paying off a small installment loan. A car loan with $6,000 left and a $500 payment costs you roughly $80,000–$100,000 of purchasing power. Paying it off is usually the single highest-leverage move available, and it works immediately.

2. Credit score. A higher score means a lower rate, and a lower rate means a lower payment at the same price. Moving from 620 to 680 can be worth $150–$250 a month on a $350,000 loan — which converts directly into more house.

3. Down payment size. More down means a smaller loan and, past 20%, no mortgage insurance at all. But cash spent on the down payment is cash not available for reserves, so this trades one strength for another.

4. Loan program. FHA allows the most debt-to-income headroom of the mainstream programs. VA (Department of Veterans Affairs loan — a loan for eligible veterans, active-duty service members, and some surviving spouses, usually with no down payment) is the cheapest monthly payment for eligible service members because there's no monthly mortgage insurance. The right program can be worth more than a credit-score improvement.

5. Property taxes and insurance in your target area. Two neighborhoods twenty minutes apart can differ by $400 a month in escrow. Shopping a lower-tax area is a real affordability strategy, not a technicality.

Approval amount vs. what you should actually spend

A pre-approval letter is a ceiling, not a recommendation. Before you shop at the top of it, run this check on the *approved* payment:

• Subtract it from your take-home pay — not gross.
• Then subtract childcare, transportation, groceries, insurance premiums, and minimum retirement contributions.
• Then subtract $250–$500 a month for maintenance. Homes cost roughly 1% of their value per year to keep up, and it does not arrive evenly.

If what's left doesn't cover savings and a normal life, the number is too high regardless of what the letter says.

A useful gut check: could you still make the payment if one income dropped by 20% for six months? If the answer is no, buy less house. Every foreclosure conversation in this industry starts with a payment that worked perfectly until something ordinary happened.

Common mistakes that shrink your number late

These are the four ways buyers lose purchasing power *after* pre-approval, when it hurts most.

• Financing a car mid-process. A new car payment can drop your approved price by $75,000 overnight. Do not open any credit between pre-approval and closing.
• Ignoring HOA dues. A $350 monthly HOA cuts roughly $55,000 off your maximum price. Check dues before you fall in love with a condo.
• Assuming the listing's tax figure. Property taxes are frequently reassessed on sale. In some states the new owner's bill is dramatically higher than the seller's.
• Counting income that can't be used. Bonus and commission income generally need a two-year history to count. Overtime and side income follow the same rule. A raise that started three months ago usually can't be used at its new level yet.