The first number is how much a lender will approve you for. This depends on your income, your existing debt, your credit score, and current interest rates. The second number is how much you can actually afford without feeling squeezed every month. Lenders calculate the first number. You need to calculate the second one yourself, because nobody at the bank is going to do it for you.

Most affordability guidance starts with debt-to-income ratio, or DTI, since that’s the metric lenders lean on most heavily. But DTI alone misses a lot. It doesn’t know about your savings goals, your job stability, or whether you’re planning to have kids next year. Use it as a starting point, not a finish line.

A common guideline splits your income into two ratios. Your housing payment, including principal, interest, taxes, and insurance, shouldn’t exceed 28% of your gross monthly income. That’s the front-end ratio. Your total debt payments shouldn’t exceed 36% of gross monthly income. That includes housing, car loans, student loans, and minimum credit card payments. That’s the back-end ratio.

Say you earn $7,000 a month before taxes. The 28% front-end limit puts your maximum housing payment at $1,960. The 36% back-end limit puts your maximum total debt payments at $2,520. Suppose you’re already paying $400 a month toward a car loan and student loans. That leaves $2,120 for housing under the back-end rule. That’s tighter than the front-end number alone would suggest. Our Debt-to-Income Ratio guide breaks down both ratios and how lenders actually use them in underwriting.

The 28/36 rule is a guideline, not a law. Many lenders will approve back-end ratios up to 43%, sometimes higher for borrowers with strong credit or a large down payment. This is exactly why the amount you get approved for often exceeds the amount you’d choose if you were being conservative. The bank is measuring default risk. You’re measuring quality of life. Those aren’t the same calculation.

This gap matters most for anyone with irregular income, high childcare costs, or a strong preference for saving aggressively. A back-end ratio of 43% might genuinely fit someone with stable dual income and no kids. It might crush someone with a single income supporting a family, even at the identical dollar amount.

A larger down payment reduces your loan amount, which reduces your monthly payment directly. It also often unlocks a better interest rate, since lenders view a bigger down payment as lower risk. Cross the 20% down payment threshold on a conventional loan, and you generally avoid private mortgage insurance entirely. That’s an extra monthly cost that protects the lender, not you. Our PMI guide covers exactly how that cost gets calculated and when it drops off.

Putting down less than 20% isn’t automatically a mistake. Sometimes it makes sense to buy sooner with a smaller down payment, rather than wait years to save a bigger one. This especially applies in a market where prices rise faster than your savings rate. The right choice depends on your specific numbers, not a blanket rule that one path always beats the other.

A one percentage point change in mortgage rate can shift your monthly payment by hundreds of dollars on an average-priced home. On a $400,000 loan, moving from 6% to 7% raises your monthly principal and interest payment by roughly $270. That’s not a rounding error, it’s often the difference between a comfortable payment and a tight one.

This is why the same house can feel affordable one year and out of reach the next. Your income doesn’t even have to change. Rate environments shift, and your maximum affordable price shifts right along with them. Check current rates before you lock in a target price, not after.

Principal and interest are only part of your monthly payment. Property taxes, homeowners insurance, and often mortgage insurance all get bundled into an escrow account and added to your bill. Our Escrow guide explains how that account actually works. Beyond that, homeownership brings maintenance costs a landlord would otherwise absorb. A broken water heater, a roof repair, routine upkeep renters never think about, it all falls on you now.

A reasonable rule of thumb sets aside 1% to 2% of your home’s value annually for maintenance and repairs. On a $400,000 home, that’s $4,000 to $8,000 a year, on top of your mortgage payment. Leave this out of your budget, and an affordable-looking payment can still leave you stretched. The first thing that breaks will prove it.

A fixed-rate mortgage locks your interest rate for the life of the loan. Your principal and interest payment never changes. An adjustable-rate mortgage typically starts with a lower rate. It adjusts periodically after an initial fixed period, based on market conditions. Our ARM vs Fixed Rate guide covers the tradeoffs in detail. For affordability purposes, here’s the key point. A lower initial ARM payment might look more affordable today, but it carries payment uncertainty a fixed rate doesn’t.

A DTI ratio treats a salaried employee the same as a freelancer with variable income, as long as the math averages out the same. Ten years at one company counts the same as a patchwork of contracts. Lenders average your income over recent tax returns. Real life doesn’t average out that smoothly. A slow month for a commission-based earner still has to cover the mortgage payment. So does a gap between freelance contracts.

If your income varies month to month, consider budgeting toward your worst realistic month, not your average one. Build a larger cash buffer before buying. Lean toward the conservative end of any affordability range a calculator gives you. The math doesn’t know your income is unpredictable. You do, so build that knowledge into the decision yourself.

Property taxes vary enormously by location, sometimes by a factor of five or more between states. Homeowners insurance costs vary too. In areas prone to flooding, wildfire, or hurricanes, premiums can run several times the national average. Two identical houses at the identical price can carry very different true monthly costs, depending entirely on where they sit.

This is why a national affordability guideline only gets you partway there. Always price out actual property tax rates and insurance quotes for your specific area. Don’t assume a rough national average applies to your situation.

Say you earn $90,000 a year, or $7,500 a month before taxes. You have $500 a month in existing debt payments from a car loan and student loans. Using the 28% front-end rule, your maximum housing payment is $2,100. Using the 36% back-end rule, your maximum total debt is $2,700. Subtract your existing debt, and that leaves $2,200 available for housing. The back-end rule is actually less restrictive here, so your effective housing budget lands around $2,100.

At current rates, a $2,100 monthly payment, including taxes and insurance, might support a loan somewhere between $320,000 and $360,000. The exact figure depends on your rate, down payment, and local tax rate. Add a 10% down payment, and your total home price budget lands somewhere around $355,000 to $400,000. This is exactly the kind of calculation worth running with real numbers rather than rough estimates.

A pre-qualification is a quick, informal estimate. You report your income and debts yourself, and nobody verifies anything. It’s useful for a rough sense of your range early on, but sellers and their agents don’t take it very seriously.

A pre-approval is a different level of commitment. The lender actually verifies your income, assets, and credit before issuing a letter. That letter carries real weight in a competitive market, and most serious sellers expect to see one before they’ll take your offer seriously. Get pre-approved before you start touring homes, not after you’ve already found one you like.

Our Mortgage Calculator takes your income, debts, down payment, and interest rate. It estimates your actual monthly payment and total borrowing capacity, far more precise than a rough percentage guideline. Weighing whether buying makes sense right now versus renting? Our Renting vs Buying guide covers that broader decision. Want to understand how your payment splits between principal and interest over time? Our Amortization guide walks through the mechanics.