How Much House Can I Afford? The Complete 2025 Guide

Most people start house hunting by browsing Zillow and falling in love with a home they cannot afford. The smarter approach is to figure out your number first — the maximum monthly payment you can actually handle without stretching yourself thin.

The gold standard is the 28% rule: your monthly housing payment (mortgage, property tax, and insurance combined) should not exceed 28% of your gross monthly income. If you earn $6,000 per month before taxes, that means your total housing cost should stay under $1,680. This is not an arbitrary number — it is the threshold most lenders use to approve mortgage applications.

But there is a second rule that matters just as much. Your total monthly debt payments — housing plus car loans, student loans, credit cards, and everything else — should not exceed 36% of your gross income. Lenders call this the debt-to-income ratio, and it is one of the biggest factors in your mortgage approval. If you already have $500 per month in other debt payments, that directly reduces how much house you can afford.

Your credit score plays a massive role in what you can afford because it determines your interest rate. The difference between a 6.5% rate and a 7.5% rate on a $350,000 loan is roughly $250 per month — or $90,000 over the life of the loan. Before house hunting, check your credit score and spend a few months improving it if it is below 740.

Down payment size affects your monthly payment in two ways. First, a larger down payment means a smaller loan amount and therefore a smaller monthly payment. Second, if your down payment is under 20%, most lenders require Private Mortgage Insurance (PMI), which adds $100 to $300 per month to your cost. Saving for a 20% down payment can save you thousands over the years.

The most common mistake first-time buyers make is forgetting about the hidden costs of homeownership. Property taxes, homeowners insurance, maintenance (budget 1% of the home value per year), HOA fees, and utilities can easily add $500 to $1,000 per month on top of your mortgage payment. Factor these in before you commit.

Use our free mortgage calculator to find your exact number — enter your income, down payment, and interest rate to see what you can really afford.