How Much House Can You Actually Afford?

Banks will happily approve you for a mortgage that consumes 43% of your gross income. That doesn't mean you should take it. Here's how to calculate a housing budget that lets you actually live.

The 28/36 Rule

Spend no more than 28% of gross monthly income on housing costs (mortgage + insurance + taxes + HOA). Total debt payments (housing + car + student loans + cards) should stay under 36%. These aren't maximums — they're ceilings.

A Better Target: 25% of Take-Home

Using gross income inflates what you can afford. Calculate based on take-home pay instead. If you bring home $6,000/month after taxes, aim for $1,500 or less in total housing costs.

The Hidden Costs

Your mortgage payment is just the start. Budget 1-2% of the home's value annually for maintenance. Add property taxes, insurance, HOA fees, and higher utility bills. A $300,000 home with a $1,600 mortgage easily costs $2,200-2,500/month all-in.

The Down Payment

20% down avoids PMI (private mortgage insurance), which adds $100-300/month. But don't drain your emergency fund to hit 20%. Some programs allow 3-5% down for first-time buyers. Run the numbers both ways.

When Renting Makes More Sense

If you'll move within 5 years, buying rarely makes financial sense after transaction costs. If buying would require more than 30% of take-home, keep renting and investing the difference. There's no shame in renting — it's often the smarter financial move.