How Much House Can You Afford?
The short answer: most lenders look at how much you can comfortably repay each month—not just the price of the house. A common starting point is the 28/36 rule, which suggests keeping your housing payment near 28% of your gross monthly income and your total debt payments at or below 36%. But the real number depends on your full financial picture, and the clearest way to find it is to get pre-approved.
Start with your debt-to-income ratio (DTI)
Lenders use your debt-to-income ratio—your monthly debt payments divided by your gross monthly income—to gauge how much new mortgage debt fits your budget. It has two parts:
- Front-end (housing) ratio: your estimated monthly housing payment as a share of income.
- Back-end (total) ratio: all your monthly debt—housing plus car loans, student loans, credit cards, and similar—as a share of income.
Lower ratios generally give you more room and more loan options. Every loan program sets its own limits, so treat these as guidelines, not hard rules.
The 28/36 rule, with an example
If your household earns $7,000 per month before taxes
If you already pay $400/month on a car loan, that leaves roughly $2,120 for housing within the 36% guideline.
These figures are illustrative. Your actual limits depend on the loan program, your credit, and current rates.Your monthly payment is more than principal and interest
When you estimate affordability, remember that a mortgage payment usually bundles several costs—often called PITI:
- Principal & InterestRepaying what you borrowed, plus the cost of borrowing it.
- Property TaxesUsually collected monthly and held in escrow.
- Homeowners InsuranceProtects the home; often escrowed too.
- PMI or HOAMortgage insurance or association dues, when they apply.
It is also smart to budget for your down payment, closing costs, cash reserves, and ongoing maintenance—the costs that come before and after the monthly payment.
Why pre-approval gives you the real answer
A rule of thumb is a helpful starting point, but pre-approval tells you what you can actually borrow:
- Pre-qualification is a quick, informal estimate based on information you share.
- Pre-approval is a documented review of your income, assets, and credit that results in a letter you can take to sellers.
Getting pre-approved before you shop helps you focus on homes in your range and makes your offer stronger in a competitive market.
Ways to strengthen what you can afford
- Pay down existing debt to improve your back-end ratio.
- Build your credit, which can affect the loan options available to you.
- Save for a larger down payment to reduce your loan amount.
- Ask about loan programs, including options that may help first-time buyers.
Find your number with BANK19
Our local mortgage team can walk you through your options and help you get pre-approved—no pressure, no runaround.
Frequently Asked Questions
What is a good debt-to-income ratio to buy a house?
Many lenders look for a total (back-end) debt-to-income ratio at or below about 36%, though some loan programs allow higher. A lower ratio generally gives you more options. The clearest way to know where you stand is to talk with a mortgage specialist.
What's the difference between pre-qualification and pre-approval?
Pre-qualification is a quick estimate based on information you provide. Pre-approval is a documented review of your income, assets, and credit that produces a letter showing sellers you're a serious, ready buyer.
Does the 28/36 rule include my down payment?
No. The 28/36 rule refers to your monthly payments—housing costs and total debt—as a share of your gross monthly income. Your down payment and closing costs are separate upfront expenses to plan for.
How much should I save for a down payment?
It depends on the loan program you choose. Some programs allow lower down payments, and there may be first-time homebuyer options that reduce upfront costs. A BANK19 mortgage specialist can explain what applies to your situation.
Can I get pre-approved with BANK19 before I start house hunting?
Yes. BANK19's mortgage team can help you get pre-approved so you know your price range before you start looking. Reach out through the Home Loans page to get started.
