Start here — what a comfortable budget really looks like.
There are two very different questions hiding inside “how much house can I afford?” The first is how much will a lender let me borrow? The second is how much can I spend and still live comfortably? The numbers are rarely the same — and the gap between them is where most affordability mistakes happen. A lender will approve you up to their maximum. Your job is to find your maximum, which is almost always lower.
This guide walks through both numbers so you can set a budget you won’t regret.
A home’s sticker price matters less than what it costs you every month. That monthly cost — what lenders call PITI — has four parts: principal and interest on the loan, property taxes, and homeowners insurance. If the home has HOA dues, add those too. Two houses with the same price can carry very different monthly costs depending on local taxes, insurance and HOA fees — which is why “we can afford a $450K house” is less useful than “we’re comfortable at $3,000 a month, all in.”
Interest rates move that monthly number more than almost anything else. As of early July 2026, the average 30-year fixed rate is hovering around 6.4–6.5%. At that rate, every $100,000 you borrow costs roughly $630 a month in principal and interest — before taxes and insurance.
The classic budgeting shortcut is the 28/36 rule:
A household earning $100,000 a year grosses about $8,333 a month. The 28% line puts the housing budget at roughly $2,333 a month. At today’s rates, with 20% down, that supports a home price somewhere in the $350,000–$400,000 range — less if you carry other debt, since the 36% cap kicks in first.
Treat 28/36 as a starting point, not a verdict. It’s a decades-old rule that knows nothing about your childcare costs, your commute, or your savings goals.
Lenders size you up with your debt-to-income ratio (DTI): monthly debt payments divided by gross monthly income. Conventional lenders like to see DTI under 36%, but many approve up to 43%, and some programs stretch to 50%.
Notice the gap: the comfortable guideline is 28% of income on housing, but a lender might approve you at a level that consumes far more. Borrowing at your approval ceiling is how people end up “house poor” — technically able to make the payment, but with nothing left for emergencies, retirement, or a life. A useful discipline: aim to buy at about 80% of your maximum approval. Approved for $400K? Shop like your ceiling is $320K.
Both 28/36 and DTI share two blind spots:
They use pre-tax income. On a $100,000 salary, you may take home closer to $70,000 after taxes and 401(k) contributions. A payment that’s “28% of gross” is a much bigger bite of your actual paycheck.
They ignore your real life. Childcare, healthcare, groceries, transportation, supporting family — none of it appears in a DTI calculation. Two households with identical incomes can have wildly different comfortable budgets.
The fix is simple: build your budget from your take-home pay and real spending, not from what a formula says you can technically carry.
Affordability isn’t only about the monthly payment — you also need cash at closing.
Down payment: the 20% myth. Nearly a third of buyers believe they need 20% down. They don’t. The median first-time buyer puts down about 10%, and many loan programs accept 3% — or even 0% for VA and USDA loans. Putting down less than 20% on a conventional loan usually means paying private mortgage insurance (PMI), typically 0.3%–1.15% of the loan amount per year — a real cost, but often a reasonable price for buying years sooner. PMI also isn’t forever; it can be removed once you build enough equity.
Closing costs. Budget roughly 2%–5% of the loan amount for lender fees, title, appraisal, and prepaid taxes and insurance.
Reserves. Plan to close with an emergency fund still intact — ideally 3–6 months of the new, higher monthly cost. Draining every dollar into the down payment is how a broken furnace becomes a credit card balance.
The mortgage is only part of the bill. Recent analyses put the “hidden” costs of owning — maintenance, insurance and property taxes — at roughly $16,000 a year for the average U.S. homeowner, and they’re rising faster than incomes:
These vary enormously by location, so check the actual tax history and insurance quotes for any home you’re serious about — not the national averages.
Pull it together. A home price is comfortable for you if:
If a number fails one of these checks, the answer isn’t necessarily “don’t buy.” It might be a smaller down payment with PMI, a different neighborhood with lower taxes, or six more months of saving. The point is to know before you fall in love with a house.
The best budget isn’t the biggest one you qualify for. It’s the one that still feels good on month thirty-seven.
Rules of thumb get you close. Your Buying Power runs this math on your actual income, debts and cash — and firms it up into a verified pre-approval when you’re ready to make offers. Sellers trust a verified number, and so should you.
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