How much house can you afford?

A common rule of thumb, which the CFPB cites, is a total monthly home payment of no more than 28% of your gross income. Work backward from that payment, subtract taxes and insurance, and the rest tells you the loan, and with your down payment, the price.

The 28% rule of thumb

The CFPB's home loan toolkit says a common mortgage lending rule of thumb is a total monthly home payment at or below 28% of gross monthly income. Lenders may approve more or less.

Debt-to-income ratio counts everything

Lenders also divide all your monthly debt payments, including the new home payment, by your gross monthly income. Different lenders and loan types set different limits.

Rates move the price a lot

The same monthly payment carries a smaller loan at a higher rate. Your credit score, down payment and loan type all affect the rate you are offered.

Conforming loan limits

In most of the US, loans up to $832,750 in 2026 can be bought by Fannie Mae and Freddie Mac. High-cost areas go up to $1,249,125. Larger loans may have different terms.

Start with the monthly payment

Lenders think in monthly payments, and so should you. Multiply your gross monthly income by 0.28 to get a starting ceiling for the total monthly home payment. On $84,000 a year, that is $7,000 × 0.28 = $1,960.

Then check it against your real budget. The CFPB suggests listing what you spend now, adding the new costs of owning, and deciding what you can comfortably pay. If your budget says less than 28%, use the lower number.

Subtract what is not the loan

The total home payment includes property tax, homeowners insurance, mortgage insurance if you put less than 20% down, and HOA fees. None of that pays off the loan.

Subtract those from your target payment. What is left is what you can spend on principal and interest. That amount, the interest rate and the loan term together set the size of loan you can carry.

Turn the payment into a price

Use a mortgage calculator, or the CFPB's tools, to find the loan a given principal and interest payment will carry at your expected rate. Then add your down payment. That sum is your price ceiling.

Remember closing costs come on top. The CFPB suggests budgeting 2% to 5% of the price for them, separate from the down payment.

Check your debt-to-income ratio

Your debt-to-income ratio, or DTI, is all your monthly debt payments divided by gross monthly income. Include the new home payment, car loans, student loans and credit card minimums.

Lenders use DTI to judge whether you can handle the payments, and their limits differ. A lower DTI leaves more room in your budget and may help you qualify for better terms. Paying off a car loan before you apply can raise the price you can afford.

Leave room for the rest of owning

The CFPB reminds buyers to budget for maintenance, repairs and utilities, which can be higher than in an apartment. Its worksheet uses 1% of the home's price a year for upkeep as a common rule of thumb.

If the payment fits only when saving stops and repairs are ignored, aim for a lower price. A smaller home that leaves room to breathe is a better deal than a bigger one that leaves you stretched.