Buying a home starts with one question: how much house can you actually afford? The answer isn’t just the biggest loan a lender will approve — it’s the payment you can live with comfortably every month. Here’s how lenders look at it, and how to run the numbers yourself.
The 28/36 rule
A time-tested starting point is the 28/36 rule:
- 28% for housing: Your monthly housing costs (mortgage payment, property taxes, homeowners insurance, and HOA dues) should stay at or below about 28% of your gross monthly income.
- 36% for total debt: All of your monthly debt payments combined — housing plus car loans, student loans, and credit card minimums — should stay at or below about 36% of gross income.
Example: If your household earns $7,500 per month before taxes, the 28% guideline suggests keeping total housing costs under about $2,100 per month, and total debt payments under about $2,700.
Some loan programs allow higher ratios, but the 28/36 rule is a good test of what will feel comfortable rather than merely approvable.
What lenders actually check: debt-to-income ratio (DTI)
When you apply for a mortgage, the lender calculates your debt-to-income ratio — your total monthly debt payments divided by your gross monthly income. A lower DTI means more room in your budget and better loan options. If your DTI is high, paying down a car loan or credit card balance before applying can meaningfully increase what you qualify for.
The other big levers
Down payment. A larger down payment lowers your loan amount, your monthly payment, and — if you reach 20% down on a conventional loan — lets you avoid private mortgage insurance (PMI), which is an extra monthly cost that protects the lender, not you.
Credit score. Your score heavily influences the interest rate you’re offered. Even a modest rate difference changes your monthly payment and can add up to tens of thousands of dollars over the life of a 30-year loan.
Interest rates. Rates move with the market. The same budget buys more house when rates are lower, so it’s worth getting a current quote rather than relying on numbers you saw months ago.
The costs beyond the mortgage. Property taxes, insurance, maintenance (a common rule of thumb: budget 1% of the home’s value per year), utilities, and HOA fees all come out of the same paycheck. A house you can “afford” on paper but that leaves nothing for savings or emergencies isn’t affordable in practice.
A quick way to run your numbers
- Take your gross monthly household income.
- Multiply by 0.28 — that’s a comfortable ceiling for total monthly housing costs.
- Subtract estimated property taxes, insurance, and any HOA dues for homes in your target area.
- What’s left is the mortgage payment your budget supports — a lender or online calculator can translate that into a loan amount at today’s rates.
Frequently asked questions
Can I qualify for more than the 28/36 rule suggests?
Often, yes — some programs approve DTIs well above 36%. But qualifying for a payment and being comfortable with it are different things. Leave room for savings, retirement, and surprises.
Do I really need 20% down?
No. Many buyers put down far less — some programs allow 3–3.5% down. You’ll typically pay PMI until you build enough equity, but waiting years to save 20% can cost more than the PMI does.
Should I get preapproved before house hunting?
Yes. A preapproval tells you your real budget, shows sellers you’re serious, and surfaces any credit issues while there’s still time to fix them.
This article is for educational purposes only and is not financial advice. Your situation is unique — talk to a licensed mortgage professional about your specific circumstances.
Ready to see what you qualify for? Get your free, no-obligation mortgage quote today.
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