How Much House Can You Actually Afford?

When you get pre-approved for a mortgage, the lender tells you the maximum they're willing to lend. It's tempting to treat that number as your budget, but the maximum a bank will approve and the amount you can comfortably afford are rarely the same thing.

A widely used guideline is the 28/36 rule. It suggests spending no more than 28% of your gross monthly income on housing costs, and no more than 36% on total debt including the mortgage, car loans, and credit cards. Staying within these limits leaves room for the rest of your life to breathe.

Remember that your monthly payment is more than principal and interest. Property taxes, homeowners insurance, and — if your down payment is under 20% — private mortgage insurance all add to the bill. On top of that, homes carry ongoing maintenance costs that renters never see, often estimated at around 1% of the home's value per year.

A larger down payment lowers your monthly payment, reduces the total interest you'll pay over the life of the loan, and can help you avoid PMI entirely. Before you stretch to buy at the top of your range, run the numbers at a more conservative price and see how much easier the rest of your budget becomes.

Use a mortgage calculator to test different scenarios: a higher down payment, a shorter loan term, or a slightly lower purchase price. The goal isn't to buy the most house the bank allows — it's to buy a home that still lets you save, invest, and enjoy life without feeling house-poor.