How Much House Can You Comfortably Afford?

Hands holding a small house icon, representing home affordability

You get the call. You’re pre-approved. There’s a number.

For many first-time buyers, that number immediately becomes the budget. The search gets filtered up to it. The offers go up to it. The logic being: the bank said we can afford this, so we can afford this.

But that’s not actually what the bank said. What the bank said is that they’re willing to lend you that much. Those are not the same thing, and the gap between them is where a lot of people get into trouble.

What the Bank Is Actually Calculating

Lenders aren’t trying to set you up to fail. They’re also not trying to optimize your financial life. They’re trying to assess whether you’re likely to repay the loan. That’s a narrower question than it sounds.

The main tool they use is your debt-to-income ratio (DTI), which is your total monthly debt payments divided by your gross monthly income. Most conventional lenders follow the 28/36 rule, but will approve borrowers up to a 43% DTI. FHA loans allow up to 43% on the back end with a more relaxed 31% front end. VA loans go up to 41% and don’t have a front-end cap at all.

In plain terms: if you earn $7,000 a month before taxes, a lender might be comfortable with you carrying up to $3,010 in monthly debt. That’s your mortgage, property taxes, insurance, car payment, and student loans, all of it combined.

That number isn’t wrong. It’s just incomplete.

The Number the Bank Ignores

Here’s the thing about gross income: you can’t spend it.

Lenders approve you based on what you earn before taxes. You pay your mortgage with what’s left after federal and state taxes, Social Security, Medicare, retirement contributions, health insurance premiums, and whatever else comes out before your paycheck hits your account. Depending on your situation, that gap between gross and net is often 25-35%.

That $7,000 gross income? It might be $4,800 that actually lands in your checking account. Your mortgage payment doesn’t know or care about the difference.

And that’s before the costs lenders don’t factor in at all:

Maintenance and repairs. The standard rule of thumb is 1% of your home’s value per year. On a $400,000 home, that’s $333 a month that needs to live somewhere in your budget. Some years you spend nothing. Some years your furnace dies in February.
Utilities. A 2,400 square foot house costs meaningfully more to heat and cool than the apartment you’re leaving.
HOA fees. Anywhere from nothing to several hundred dollars a month, depending on the community.
Everything else. The stuff that makes your life your life. Vacations, dinners out, kids’ sports, the weekend trips. None of it shows up in a DTI calculation.

A lender’s job is to assess whether you’ll make your payments. That’s it. Figuring out whether you’ll actually be okay is your job.

A More Useful Starting Point

The 28/36 rule has been around long enough that most financial advisors know it by heart, and it holds up reasonably well as a sanity check:

28%: your monthly housing costs (principal, interest, taxes, insurance) shouldn’t exceed 28% of your gross monthly income
36%: your total debt load, housing plus everything else, shouldn’t exceed 36%

Compare that to what banks actually approve, and the gap is striking:

Rule	Maximum Monthly Amount
28% housing costs	$1,960
36% total debt	$2,520
Bank’s 43% DTI limit	$3,010

On a $7,000 gross monthly income, the difference between the bank’s ceiling and the 28/36 guideline is somewhere between $490 and $1,050 a month. Annualized, that’s $5,880 to $12,600. That’s not an abstract number. It’s the difference between a financial life that has some breathing room and one that doesn’t.

The 28/36 rule isn’t gospel. But it exists because someone had to draw a line somewhere between “the bank will approve this” and “you will not regret this.”

The Down Payment Question

How much you put down changes more than just the loan amount. It affects your monthly payment, whether you owe private mortgage insurance, and how much of a cushion you have if you need to sell before the market cooperates.

The 20% down conventional wisdom has real logic behind it:

No PMI, which typically runs 0.5-1.5% of the loan amount per year. On a $320,000 loan, that’s $1,600 to $4,800 annually just for the privilege of putting less down.
Lower monthly payment.
Enough equity that a modest dip in home values doesn’t put you underwater.

The catch is that 20% on a $400,000 home is $80,000. For a lot of buyers, especially first-timers, that number takes years to accumulate, if it’s reachable at all. FHA loans let you put down as little as 3.5%. Some conventional programs go as low as 3%. VA loans require no down payment at all for eligible veterans. The tradeoffs vary: FHA adds mortgage insurance (MIP) for the life of the loan, conventional PMI drops off once you reach 20% equity, and VA loans charge a one-time funding fee instead of monthly insurance.

None of these approaches is automatically right. Our Down Payment Calculator lets you model different scenarios side by side so you can see what the actual monthly difference looks like before you decide.

What “Comfortable” Actually Means

This is the part that doesn’t fit in a spreadsheet.

Affordability is partly math and partly a question about what you want your financial life to feel like. Some people are genuinely happy stretching to their approval limit. Homeownership is the priority, they’ve thought it through, and they’re prepared to cut back elsewhere to make it work. Others would find that same payment suffocating within six months. Both are valid. What’s not valid is letting the bank’s number answer the question for you.

Before you anchor to an approval amount, it’s worth sitting with a few things:

What does my actual take-home pay look like, and what does my current spending tell me I can realistically absorb?
If the furnace dies or the roof needs work in year one, do I have enough in reserve to handle it without panic?
Am I at the ceiling of my income right now, or is there a reasonable case that it grows?
What does my life look like in five years: same city, same job, same number of people in the household?

None of these questions produce a number. But they produce an honest answer, which is more useful than the one on the pre-approval letter.

Run Your Own Numbers

Everything above uses round numbers for illustration. Your actual situation is specific to you: your income, your existing debts, your local property tax rate, what you can put down, and what loan programs you qualify for.

Our House Affordability Calculator lets you plug in your real numbers and compare Conventional, FHA, and VA loans side by side. It factors in PMI, FHA mortgage insurance, VA funding fees, closing costs, HOA, and maintenance so you can see what you can genuinely carry, not just what looks good on a loan application. The Mortgage Calculator shows you what different loan amounts and terms actually do to your monthly payment. And if you want to know where you stand on DTI before you walk into a lender’s office, the Debt-to-Income Ratio Calculator gives you that number in about thirty seconds.

The bank will give you their answer. It’s worth having yours first.