How Much House Can I Afford?

How Much House Can I Afford?

The question every first-time homebuyer types at 11pm in a mild panic.

You spent 45 minutes on Zillow tonight. You found a place. It has the light wood floors and the kitchen island. Then you saw the price, and now you’re spiraling into a Google rabbit hole that somehow ended here. Good. Let’s fix it!

The short answer: most lenders want your total monthly debt payments to stay below 45% of your gross income. That includes your future mortgage, car payment, student loans, credit cards, all of it. That number is called your debt-to-income ratio, or DTI, and it matters more than almost anything else in the mortgage process.

Say you gross $5,500 a month, multiply that by .45 and you get $2,475. That’s your ceiling for ALL monthly debt combined. If you’re already paying $400 in student loans and $300 for your car, you’ve got roughly $1,775 left for a mortgage payment.

That mortgage payment covers principal, interest, property taxes, and insurance. On a $250,000 loan at 6.5% over 30 years, your principal and interest alone runs about $1600 a month. Add taxes and insurance and you’re probably pushing $2,000 or more depending on where you buy. So that “starter home” that looks reasonable on Zillow? Run the full numbers first.

There are two rules every loan officer references in the first conversation. Think of them like the guardrails before anyone even pulls your credit.

The 28% Rule – Housing costs only

Your housing payment should not exceed 28% of your gross income before other debts are factored in.

The 45% Rule – All debt combined

All monthly debt payments combined should stay under 45% of gross income for most loan products.

Now here is the part nobody talks about on TikTok between the "I bought a house at 24 with no money down" videos. Being approved for a loan and actually being able to afford the house are two very different things. A lender will approve you for the maximum they can legally offer you. That does not mean you should take it.

If you match with someone on Hinge and they seem perfect on paper, you still do not propose on the first date. Same energy with your mortgage approval. Just because you qualify for $400,000 does not mean a $400,000 purchase fits your actual life.

Three questions worth sitting with tonight instead of scrolling Zillow. What does the total monthly payment look like on a 30-year loan at current rates? What does your emergency fund look like after you close, because repairs happen immediately? And what are property taxes in that specific zip code, because they vary wildly and get baked into your monthly payment?

The math here is not complicated once you stop avoiding it. Pull your gross monthly income, multiply it by 0.28, and you have a realistic starting point for what your housing payment can be. That number will tell you more in 30 seconds than three hours of Instagram reels about first-time buyer hacks.

Want to know your actual number? Multiply your annual salary by 3 as a rough starting point for total purchase price. Someone earning $70,000 a year is generally looking at $210,000. Again, that is a starting point, not a ceiling, and your full financial picture changes it significantly.

Remember…you are not behind. You are just starting to ask the right questions. The next step is not finding the perfect house. It is getting preapproved so you know exactly what you can afford before you fall in love with something that does not fit the budget.