How Much House Can I Afford?
Understanding your home buying budget based on income, debts, and financial goals
The 28/36 Rule
Lenders use the 28/36 rule to determine how much you can borrow:
28% Front-End Ratio
Your monthly housing costs should not exceed 28% of your gross monthly income.
36% Back-End Ratio
Your total monthly debts (including housing) should not exceed 36% of gross income.
What Affects Your Affordability?
1. Your Income
Higher income means you can afford more house. Most lenders use gross (pre-tax) income.
2. Existing Debts
Car loans, student loans, and credit card payments reduce how much you can borrow.
3. Down Payment
A larger down payment means a smaller loan. 20% down avoids PMI.
4. Interest Rate
Lower rates mean lower monthly payments, allowing you to afford more.
Tips for First-Time Buyers
- 1Get pre-approved before house hunting
- 2Buy less than you qualify for - leave room for unexpected expenses
- 3Factor in closing costs (2-5% of home price)
- 4Keep an emergency fund for repairs and maintenance