How Much House Can I Afford?
Work through it with your own budget open.
Affordability is not one number. It is the overlap between what a lender will approve, what the property costs to own each month, and what leaves your life intact.
This guide is a framework, not financial advice, and it contains no rates, ratios or dollar figures — those depend on your lender, your credit, your loan type, the property and where you live. Talk to a lender and, if useful, a financial professional for your numbers.
Three different numbers
Confusing these is the single most common affordability mistake.
- The approval amount: the maximum a lender is willing to lend you, based on their criteria.
- The property's cost: what a specific home actually costs to own each month, which varies house by house at the same price.
- Your comfortable amount: what you can pay every month while still saving, absorbing surprises and living.
Start from your budget, not from listings
Decide what you are willing to spend on housing each month before you know what that buys. Doing it the other way around anchors you to a market rather than to your life.
What is actually in the monthly payment
A quoted principal and interest figure is only part of what leaves your account.
- Principal and interest.
- Property taxes, often escrowed.
- Homeowners insurance, often escrowed.
- Mortgage insurance where applicable.
- HOA dues where applicable.
- Utilities, which vary by home size, age and location.
- Maintenance and future replacements.
Cash needed, not just monthly
- Down payment, per your loan program.
- Closing costs, per your lender's written estimate.
- Inspections and testing during the process.
- Moving and immediate move-in costs.
- Reserves left over after all of the above.
Working with a lender
Talk to more than one. Programs, requirements and costs vary by lender and by loan type, and the differences matter.
- Ask for a written estimate showing the full monthly payment including escrowed items.
- Ask which loan programs you qualify for and how they differ in cost over time.
- Ask what a pre-approval commits you to and how long it lasts.
- Ask how a change in the property's taxes, insurance or HOA dues affects the payment.
- Ask what would change the approval between now and closing.
Stress-test your number
Common mistakes
- Treating the pre-approval maximum as the shopping target.
- Comparing homes by list price when their carrying costs differ.
- Forgetting escrowed taxes and insurance in the monthly math.
- Planning around future income that has not arrived.
- Closing with no reserves left.
- Opening new credit or changing jobs mid-process without asking the lender first.
Frequently asked questions
Should I spend up to my pre-approval amount?
A pre-approval is a lender's ceiling based on their criteria, not a recommendation. Many buyers deliberately shop below it so the monthly payment leaves room for saving and surprises.
What percentage of income should go to a mortgage?
Guidelines circulate widely but vary by lender, loan type and situation, and none of them know your other obligations. Build the number from your own budget and confirm requirements with your lender.
Does the down payment change what I can afford?
It affects the loan amount, potentially the loan program and possibly mortgage insurance — but it also affects the cash you keep in reserve. Both sides matter; your lender can model the trade-off.
Can two houses at the same price have different affordability?
Yes. Property taxes, insurance, HOA dues, utilities and expected maintenance vary by property, so identical prices can mean very different monthly costs.