How Much House Can I Afford?

When my wife and I started house hunting a few years back, we went to an open house on a whim for a place about 30% above what I’d told myself was our budget. It was beautiful. We drove home in silence. Then I spent the next week building a spreadsheet that answered, definitively, what we could actually afford without lying to ourselves.

Here’s what I learned from that exercise — and from the mortgage process that followed.

The 28/36 Rule (and Why It’s a Starting Point, Not a Ceiling)

Lenders use what’s called the 28/36 rule as a benchmark: no more than 28% of your gross monthly income should go toward housing costs (mortgage principal, interest, property taxes, insurance), and your total monthly debt — housing plus everything else — shouldn’t exceed 36%.

If your household brings in $8,000/month before taxes, that means a maximum housing payment of $2,240 and total debt payments no higher than $2,880. Those are the outer limits lenders typically use. Whether it’s comfortable for you personally is a different question.

Your Debt Load Matters More Than You Think

Before we got pre-approved, I had to account for my monthly obligations:

• Car loan: $300
• Student loan: $200
• Credit card minimum: $150

That $650 in existing debt eats directly into the 36% cap. On $8,000 gross income, my total debt ceiling is $2,880. Subtract $650 already committed, and my maximum mortgage payment is closer to $2,230. Small number, big impact on how much house I could buy. This is where a lot of people get surprised during pre-approval.

Down Payment: 20% Isn’t Just a Nice-to-Have

I pushed hard to hit 20% down on our purchase, which let us avoid private mortgage insurance (PMI). PMI typically runs 0.5%-1.5% of the loan amount annually — on a $350,000 mortgage, that’s $1,750 to $5,250 per year added to your payment. It falls off once you’ve built 20% equity, but it’s real money in the meantime. If you can’t hit 20% yet, there are FHA and conventional low-down-payment options, but price that PMI into your math.

Interest Rates Change Everything

The difference between a 6% and 7% mortgage rate on a $350,000 loan is about $225/month. Over 30 years that’s over $80,000. This is why locking in a favorable rate matters and why rushing to buy when rates are high (while also ignoring what the payment actually does to your monthly budget) can be costly. Even a fraction of a point matters at scale.

The Costs People Forget to Budget For

The mortgage payment is the obvious number, but it’s not the full picture. Don’t leave these off your budget:

• Property taxes (varies wildly by location — check the actual tax rate for specific areas you’re considering)
• Homeowner’s insurance
• Maintenance and repairs — rule of thumb is 1% of home value per year, so $3,500/year on a $350,000 house
• Utilities, which often increase significantly from apartment to house
• HOA fees, if applicable, which can range from $50 to several hundred dollars monthly

Loan Types and What They Mean for Affordability

A few loan types worth understanding:

• Fixed-rate: Your rate doesn’t change. Predictable payments for 15 or 30 years. I strongly prefer these for the peace of mind.
• Adjustable-rate (ARM): Lower initial rate, but adjusts after a set period. The 5/1 ARM gives you five years of fixed rate, then adjusts annually. Fine if you know you’ll sell or refinance before adjustment — riskier if you might stay long-term.
• FHA loans: Down payment as low as 3.5%, lower credit score requirements. Good for first-time buyers who haven’t built a 20% down payment fund.
• VA loans: If you’re a veteran or active military, these deserve serious attention — no down payment, no PMI, competitive rates.

Get Pre-Approved Before You Fall in Love with a House

Pre-approval isn’t just a formality — it tells you definitively what you qualify for and makes your offer competitive. Sellers in active markets often won’t take offers seriously from buyers who aren’t pre-approved. The process requires pay stubs, tax returns, and bank statements. It’s a bit of a paperwork project, but worth doing before you ever walk into an open house.

Online Calculators Are Useful Checkpoints

I used the Bankrate mortgage calculator extensively during our search. Plug in your numbers — loan amount, interest rate, term, property taxes, insurance — and it’ll show you what your actual monthly payment would look like at different price points. It’s not a substitute for a real pre-approval, but it’s a fast way to reality-check whether a listing is remotely in your budget before you get emotionally invested.

Budget Honestly

The pre-approval number is the maximum a lender will give you — not a recommendation about what you should spend. Just because you qualify for $450,000 doesn’t mean a $450,000 house fits comfortably in your actual life. Build a month-by-month budget that includes everything — savings, retirement contributions, travel, car maintenance — and see what mortgage payment that budget can realistically absorb before you commit to a price range.