How Much House Can You Actually Afford? The Real Calculation
Banks will approve you for more than you should borrow. Use these calculations — not the bank's maximum — to set your homebuying budget.
Financial Writer
The Bank's Number vs. Your Number
Lenders typically approve borrowers for up to 43% of gross income in total debt payments (DTI). But just because you're approved doesn't mean you should borrow the maximum. Being "house poor" — spending 40%+ of income on housing — leaves no room for savings, emergencies, or lifestyle.
The 28/36 Rule
A healthier guideline: spend no more than 28% of gross income on housing (mortgage + taxes + insurance) and no more than 36% on all debt combined. This leaves room to save for retirement and handle life's surprises.
The True Cost of Homeownership
Budget 1–2% of the home's value annually for maintenance and repairs. A $400,000 home will need $4,000–$8,000 per year in upkeep on average. Factor this in before falling in love with a property at the top of your budget.
The Down Payment Decision
A larger down payment means a smaller loan and lower monthly payment, but depletes your liquid savings. Keep at least 3–6 months of expenses in cash after closing — don't drain your emergency fund for a bigger down payment.
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