How Much House Can I Afford to Buy?

How Much House Can I Afford to Buy?

It's almost always the first question buyers ask, and for good reason. Before you tour a single home, you need a realistic number to work from.

Start with the 28/36 rule. Most lenders use this as a baseline: your monthly housing payment (principal, interest, taxes, insurance, and HOA dues if applicable) should stay at or below 28% of your gross monthly income, and your total debt payments, housing included, should stay under 36%. It's a starting point, not a hard rule, but it gives you a reasonable range to plan around.

Your down payment matters more than the "20% rule" suggests. A lot of buyers assume they need 20% down. In reality, many loan programs allow far less, FHA loans go as low as 3.5% down, and some conventional programs allow even less than that. The tradeoff is private mortgage insurance (PMI) on anything below 20% down, which adds to your monthly payment but isn't a dealbreaker if it gets you into a home sooner rather than waiting years to save more.

Don't forget the costs beyond the down payment. Closing costs typically run 2% to 6% of the purchase price. Buyers who budget only for the down payment are often caught off guard here.

Your credit score shapes your rate, and your rate shapes your budget. A stronger credit score generally means a better interest rate, which directly affects how much home you can afford at the same monthly payment. If you're not buying for a few months, it's worth checking your credit report now for errors and giving your score room to improve.

The most reliable next step: talk to a lender before you fall in love with a listing. A pre-approval gives you a real number based on your actual income, debt, and credit, not a rough online estimate. It also makes your offer far more competitive once you find the right home.