How Much House Can You Actually Afford?

The Lender Maximum vs. Your Comfortable Number

Lenders use your debt-to-income ratio (DTI) to set a ceiling. Most conventional loans cap your total DTI at 43–50%. That means if your gross monthly income is $8,000, the lender may approve you for a monthly payment around $3,200 to $3,600.

But just because a lender will lend you $500,000 does not mean you should borrow that much.

The 28/36 Rule

A common benchmark: spend no more than 28% of your gross monthly income on housing, and no more than 36% on all debt (housing + car loans + student loans + credit cards).

• Gross income: $8,000/month - 28% housing max: $2,240/month - 36% total debt max: $2,880/month

If you have no other debt, the 28% housing number is your guide. If you have a $500 car payment, your housing budget drops proportionally.

What PITI Actually Looks Like

Your monthly payment is not just principal and interest. It includes property taxes and homeowners insurance — PITI. In many areas, taxes and insurance add 25–40% on top of your principal and interest.

Example: A $350,000 home at 6.5% with 5% down: - Principal & interest: ~$2,100/month - Taxes (est. 1.2%): ~$340/month - Insurance: ~$120/month - Total PITI: ~$2,560/month

If your gross monthly income is $8,000, that is 32% — above the 28% guideline. You would want a lower-priced home or a larger down payment.

The 3 Hidden Costs Buyers Forget

• Maintenance: Budget 1–2% of the home value annually. A $350k home needs $3,500–$7,000/year for repairs and upkeep. - Utilities: Larger homes cost more to heat and cool. Ask the seller for average utility bills. - HOA fees: If applicable, these can be $200–$600/month and are non-negotiable.

How to Calculate Your Number

Start with your take-home pay, not gross. Subtract all current debt payments. Subtract estimated maintenance and utility costs. What remains for housing?

• Take-home pay: $6,200/month - Current debts: $600/month - Savings/investments: $1,000/month - Living expenses: $2,800/month - Available for housing: $1,800/month

That $1,800 number is your real budget — not the $3,600 the lender offered.

The Bottom Line

Get pre-approved to know your max. Then do your own math to find your comfortable number. Buy below that. The bank does not have to live in the house — you do.