How Much Home Can You Afford? Let’s Break It Down

Buying a home is exciting—but knowing how much house you can truly afford is one of the most important steps in the process. Overextending your budget can lead to financial stress, while underestimating your buying power might keep you from your dream home. So let’s break it down with real numbers, smart tips, and simple math.

Start With the 28/36 Rule

A common guideline lenders use is the 28/36 rule:

• No more than 28% of your gross monthly income should go toward housing expenses (mortgage, property taxes, insurance, etc.)

• No more than 36% of your gross monthly income should go toward total debt, including car loans, credit cards, student loans, etc.

Example:

If your monthly income is $6,000:

• Max housing expenses = $1,680 (28% of $6,000)

• Max total monthly debt = $2,160 (36% of $6,000)

What’s Included in "Housing Costs"?

When calculating how much home you can afford, factor in:

1. Principal & Interest (the main part of your mortgage)

2. Property Taxes

3. Homeowner’s Insurance

4. Private Mortgage Insurance (PMI) (if your down payment is under 20%)

5. HOA Fees (if applicable)

Together, these are known as your PITI payment.

Estimate Based on Your Budget

Use this formula as a basic estimate:

Affordable Home Price ≈ Annual Income x 3 to 4

If you earn $80,000/year:→ You can typically afford a home between $240,000 and $320,000 (depending on your debt, credit score, and down payment).

Credit Score & Debt Matter

Your credit score and debt-to-income ratio (DTI) play a huge role in how much you can borrow and at what interest rate. Lower interest = higher affordability.

• Aim for a credit score of 620+ to qualify for most conventional loans

• A higher score (740+) can unlock better interest rates

Down Payment Options

Your down payment affects how much home you can afford:

• 20% down = no PMI and lower monthly payments

• 3.5% down = possible with FHA loans (but includes PMI)

• 0% down = available for VA or USDA loans (if you qualify)

Example: Buying a $300,000 Home

• 20% down = $60,000

• 5% down = $15,000 + monthly PMI

Don't Forget the Extras

Homeownership comes with more than just the mortgage:

• Maintenance and repairs (budget 1% of home price per year)

• Utilities and internet

• Appliances or furnishings

• Emergency savings for unexpected costs

Use Online Calculators

There are plenty of free mortgage affordability calculators where you can plug in your:

• Income

• Debts

• Down payment

• Interest rate

And instantly get an estimated price range.

Final Thoughts

The key to buying smart is knowing your budget before you shop. A good lender can pre-approve you with real numbers, and a great agent (👋 that’s me!) can help you find a home that matches both your lifestyle and your financial comfort zone.

Ready to crunch the numbers together? I’d love to help you figure out what you can afford and guide you through the process from start to SOLD.