How Much House Can You Afford?
Lenders answer 'how much can I borrow?' with two ratios. Here's how they work, what they leave out, and how to find a number you can actually live with.
Most lenders will tell you that you can afford a home if your housing costs stay under about 28% of your gross monthly income and your total debt payments stay under about 36% (some programs stretch to 43%). Those two numbers — the front-end and back-end ratios — decide the loan you qualify for. Whether you should borrow that much is a separate, more important question.
Run your own figure with the Home Affordability Calculator, then use the framework below to pressure-test it.
The two ratios lenders actually use
Affordability comes down to debt-to-income (DTI) ratios:
- Front-end (housing) ratio — your full monthly housing payment (principal, interest, taxes, insurance and any HOA or PMI) divided by gross monthly income. Target: ≤ 28%.
- Back-end (total debt) ratio — that housing payment plus every other monthly debt (car loans, student loans, credit-card minimums) divided by gross income. Target: ≤ 36%, with many qualified mortgages allowing up to 43%.
Whichever ratio is tighter sets your limit. If you carry significant other debt, the back-end ratio — not your income — is usually what holds your price down.
A worked example
Say you earn $7,500 a month before tax, pay $600 toward other debts, and expect $450 a month in taxes and insurance:
| Step | Calculation | Result |
|---|---|---|
| Front-end cap (28%) | 7,500 × 0.28 | $2,100 |
| Back-end cap (36%) | 7,500 × 0.36 − 600 | $2,100 |
| Less taxes & insurance | 2,100 − 450 | $1,650 for P&I |
| Max loan at 6.5%, 30 yr | present value of $1,650/mo | ≈ $261,000 |
| Plus a $60,000 down payment | 261,000 + 60,000 | ≈ $321,000 home |
Change any input — a bigger down payment, a lower rate, less existing debt — and the price moves. That is exactly what the calculator lets you test.
Four levers that change your number
- Down payment. More cash down means a smaller loan and a lower payment — and at 20% down you avoid PMI entirely. See the Down Payment Calculator.
- Interest rate. Even half a percentage point meaningfully changes the loan a given payment supports. Lock rate assumptions before you shop.
- Other debt. Paying off a car loan can free up hundreds of dollars of back-end room — sometimes raising your price more than a raise would.
- Taxes and insurance. These vary widely by location and are part of the payment lenders count. A high-tax county shrinks the price you qualify for.
”Can afford” vs. “should borrow”
Qualifying for a number is not the same as it being comfortable. Lender ratios use gross income and ignore retirement saving, childcare, travel and the cost of actually furnishing and maintaining a home. A payment at the top of your 36% limit can feel fine on a spreadsheet and tight in real life.
A more conservative path: target a housing payment closer to 25% of take-home pay, and keep an emergency fund intact after the down payment. Borrowing below your ceiling is how you keep options open if rates, income or life changes.
How to find your real number
- Estimate your maximum with the Home Affordability Calculator.
- Confirm what a lender would approve using the Mortgage Qualifier Calculator.
- Price the full monthly payment — including taxes, insurance and PMI — with the Mortgage Calculator with Taxes & Insurance.
- Subtract a comfort margin and shop below the ceiling.
Frequently asked
What income do lenders use? Gross (pre-tax) monthly income, including stable, documentable sources. Bonuses and self-employment income usually need a two-year history.
Does a higher credit score let me afford more? Indirectly — a better score earns a lower rate, and a lower rate increases the loan a given payment supports.
Should I get pre-approved first? Yes. A pre-approval verifies the income, debts and credit behind these ratios and gives you a firm price to shop with.
This guide is general educational information, not financial advice. Confirm specifics with a licensed lender or advisor.