How Much House Can You Afford?

Susie Braskett
Jul 8
2 min read

One of the most important questions for any homebuyer is: How much house can I afford? While lenders may approve you for a certain loan amount, your personal budget should determine what you can comfortably spend on a home.

Start With Your Monthly Income

Your income is the foundation of your home-buying budget. Consider:

Salary and wages
Business income
Bonuses and commissions
Other reliable sources of income

Use your gross monthly income (before taxes) as a starting point.

Follow the 28/36 Rule

Many financial experts recommend the 28/36 Rule:

Spend no more than 28% of your gross monthly income on housing expenses.
Spend no more than 36% of your gross monthly income on total debt payments.

Housing expenses include:

Mortgage principal and interest
Property taxes
Homeowners insurance
HOA fees (if applicable)

Consider More Than the Mortgage

Many first-time buyers focus only on the mortgage payment.

Don't forget to budget for:

Property taxes
Homeowners insurance
Maintenance and repairs
Utilities
Landscaping
HOA dues

These costs can add significantly to your monthly expenses.

Calculate Your Down Payment

A larger down payment can provide:

Lower monthly payments
Better loan terms
Reduced interest costs
More home equity from day one

Common down payment ranges include:

3%–5% for some conventional loans
Higher amounts for larger or luxury properties

Factor in Your Debt

Lenders evaluate your debt-to-income (DTI) ratio.

Common debts include:

Car loans
Student loans
Credit card payments
Personal loans

Higher debt levels can reduce the amount you qualify to borrow.

Build an Emergency Fund

Before purchasing a home, it's wise to maintain savings for:

Unexpected repairs
Medical emergencies
Temporary income loss
Major home maintenance expenses

Many experts recommend keeping at least three to six months of living expenses in reserve.

Avoid Becoming House Poor

Being "house poor" means spending so much on housing that little money remains for other financial goals.

Signs include:

❌ Struggling to save money

❌ Carrying high credit card balances

❌ Delaying retirement contributions

❌ Living paycheck to paycheck

A comfortable budget leaves room for flexibility and future goals.

Questions to Ask Yourself

Before deciding on a purchase price, consider:

Can I comfortably afford the monthly payment?
Will I still be able to save for retirement?
Can I handle unexpected repairs?
Do I have enough emergency savings?
Will this home meet my needs for several years?

Sample Affordability Guidelines

Annual Income	Approximate Home Price Range*
$50,000	$150,000 – $250,000
$75,000	$225,000 – $375,000
$100,000	$300,000 – $500,000
$150,000	$450,000 – $750,000

*Actual affordability depends on interest rates, down payment, debts, taxes, and insurance costs.

Key Takeaway

The amount of house you can afford depends on much more than what a lender approves. By considering your income, debts, down payment, ongoing expenses, and long-term financial goals, you can choose a home that supports your lifestyle without creating unnecessary financial stress.

The best home purchase is not necessarily the most expensive home you qualify for—it's the one that fits comfortably within your overall financial plan.