This is the question every buyer asks first, and there are actually two answers — often separated by $100,000 or more. The first is what a lender will approve you for. The second is what you can actually afford without wrecking your financial life. Most buyers learn to think about the first number. The second one matters far more.
Lenders use a two-part debt-to-income framework — sometimes called the 28/36 rule — to decide how much they'll lend you. It's not a law, but it's the standard guideline that drives underwriting decisions at most conventional lenders.
Many lenders go higher than 36% on the back-end — up to 43% for conventional loans and even 50% with compensating factors on FHA and VA loans. But approval at 43% DTI doesn't mean 43% DTI is comfortable. That's half your gross income — a third of your take-home — going to debt before you pay for food, gas, or anything else.
This table uses the 28% front-end rule at 7% on a 30-year loan with typical taxes and insurance estimates. It assumes 10% down:
| Annual Income | Max Monthly Payment | Approx. Home Price |
|---|---|---|
| $50,000 | ~$1,167 | ~$150,000–175,000 |
| $75,000 | ~$1,750 | ~$225,000–260,000 |
| $100,000 | ~$2,333 | ~$300,000–350,000 |
| $125,000 | ~$2,917 | ~$375,000–440,000 |
| $150,000 | ~$3,500 | ~$450,000–530,000 |
*Assumes 10% down, 7% rate, typical taxes/insurance. Actual numbers vary significantly by location and existing debts.
The biggest mistake buyers make when estimating affordability is ignoring their existing debts. Every $400/month car payment — which is extremely common — reduces the mortgage you can qualify for by roughly $55,000–$65,000 depending on your rate. Two car payments and a student loan can cost you $150,000 in purchase power before you've signed a single piece of mortgage paperwork.
Income: $6,000/month gross
28% max housing: $1,680/month
36% back-end max: $2,160/month total debt
One car payment: $500/month → remaining for housing = $1,660/month
Two car payments at $500 each → remaining for housing = $1,160/month
That second car payment costs you roughly $80,000 in home purchase price.
Lenders base approval on your gross income and your documented monthly debt obligations. They don't see your $1,400/month in childcare. They don't see your $600/month in groceries, your health insurance premiums, your car insurance, or whether you're trying to save 10% of income for retirement. A loan you qualify for on paper can be deeply uncomfortable in practice if it swallows the portion of your take-home that was keeping everything else running.
A useful rule of thumb that financial planners often use: total housing costs (all-in PITI) shouldn't exceed 25–30% of your take-home pay after taxes — not your gross income. Lenders use gross because that's consistent and auditable. You should use take-home because that's what actually hits your bank account.
Compare that number to what the lender says you qualify for. If they're close, you're fine. If you qualify for $2,400/month but your budget says $1,800, trust your budget.
A larger down payment helps in two ways: it lowers your loan amount (reducing your monthly payment) and it reduces or eliminates PMI. If you're borderline on qualification, putting an extra $15,000–$20,000 down can shift the math meaningfully — both for lender approval and for your actual monthly comfort. It can also eliminate the need for PMI entirely if you can reach 20%, which adds $100–$300/month back to your budget.
The same $100,000 income buys radically different homes depending on where you live. In a mid-sized Midwest city, it might comfortably support a $350,000 home with reasonable monthly costs. In Miami, Seattle, or the New York suburbs, that income barely covers a modest starter home. Property taxes compound this: New Jersey averages 2.5%+ of assessed value annually, while Hawaii averages around 0.3%. On a $400,000 home, that's the difference between $1,000/month and $100/month in taxes alone. Run the full local math — not a national average — before you decide what's affordable in your market.
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