How Much House Can I Afford?
How lenders and financial planners think about affordability, and the income, debt, and down payment rules that determine your budget.
Lenders and financial planners don't answer "how much house can I afford" with a single number — they use ratios that connect your income, your existing debt, and your down payment. Understanding those ratios lets you answer the question yourself, before a lender does it for you.
The Front-End Ratio: Housing Cost vs. Income
The front-end ratio compares your total monthly housing cost — principal, interest, property tax, insurance, and any HOA fee — to your gross monthly income. A commonly cited guideline caps this around 28%, though conventional loans can sometimes go higher depending on the lender and your overall financial profile. On a $7,000 monthly gross income, a 28% front-end ratio points to roughly $1,960 a month available for housing costs combined.
The Back-End Ratio: Total Debt vs. Income
The back-end ratio, also called debt-to-income (DTI), adds your other debt payments — car loans, student loans, credit card minimums — on top of housing costs, then compares the total to gross income. A common ceiling is around 36-43%, depending on the loan type. This ratio is often the binding constraint: a low front-end ratio doesn't help if other debt pushes your back-end ratio too high.
The Down Payment's Double Effect
A larger down payment does two things simultaneously: it reduces the loan amount (and therefore the monthly principal-and-interest payment), and — if it reaches 20% of the home price — it typically eliminates private mortgage insurance (PMI), an added monthly cost. Both effects push more home price into reach for the same monthly budget.
Don't Forget the Costs Beyond the Mortgage
Property tax, home insurance, HOA fees, and maintenance are easy to underestimate when focusing on the loan itself, but they're a real and ongoing part of the cost of owning. A home that looks affordable based on principal and interest alone can strain a budget once these are added in.
Putting It Together
Start with your gross monthly income, apply a front-end ratio to estimate a housing budget, check that budget against your back-end ratio with existing debt included, and then work backward to a home price using your planned down payment and current mortgage rates.
The mortgage calculator will show you the exact monthly payment — including tax, insurance, and PMI — for any home price and down payment combination, so you can test different scenarios against your own budget directly.