How Much House Can I Afford?

How Lenders Determine How Much You Can Borrow

Lenders use two primary ratios to evaluate affordability: the front-end ratio (housing costs vs. income) and the back-end ratio (all debts vs. income). The back-end ratio — also called DTI or debt-to-income ratio — is the most important qualifying factor.

Front-End Ratio (Housing Ratio)

This compares your total monthly housing payment (principal, interest, taxes, insurance) to your gross monthly income. Most conventional loans prefer this below 28%. FHA loans may allow up to 31%.

Back-End Ratio (Total DTI)

This compares all monthly debt payments — housing, car loans, student loans, credit cards — to your gross monthly income. Conventional loans typically allow up to 43–45%. FHA loans may go to 50% with compensating factors.

The 28/36 Rule

A conservative guideline: spend no more than 28% of gross income on housing and no more than 36% on all debt combined. This keeps your finances resilient and reduces the risk of being house-poor.

Ways to Increase Your Home Buying Budget

If your estimated budget feels tighter than you would like, there are a few practical levers that can move the number. Paying down credit card balances, an auto loan, or student loan debt before you apply lowers your back-end DTI ratio and can meaningfully increase the amount a lender is willing to approve, since less of your income is already committed to other payments.

A larger down payment has a similar effect: it reduces the loan amount you need, which lowers your monthly principal and interest payment and can also help you avoid private mortgage insurance if you reach 20% down on a conventional loan. Even a modest increase in your down payment savings can shift your comfortable budget noticeably.

Your interest rate also plays a significant role. Because rates change often and vary by lender, credit score, and loan program, it is worth getting quotes from more than one lender before assuming a single rate is the best available. A lower rate increases your buying power without changing your income or debts at all.

Keep in mind that the maximum price a lender approves and a comfortable budget are not always the same number. Property taxes, insurance, utilities, maintenance, and HOA dues can all add to your true monthly cost of homeownership, so many buyers choose to shop below their maximum approval to leave room in their monthly budget.

It also helps to run a few different scenarios through the calculator rather than relying on just one. Adjusting your down payment, loan term, or estimated interest rate can show you how sensitive your budget is to each factor, which makes it easier to prioritize what to focus on, whether that is saving longer, paying down debt, or shopping for a better rate, before you start house hunting.