A general rule is that you can afford a home priced at 2.5 to 3 times your annual gross income, assuming a 20% down payment and minimal debt.

For example, with a $75,000 salary, you could afford approximately $187,500 to $225,000.

However, this varies significantly based on your debt-to-income ratio, down payment amount, interest rates, and local property taxes.

Use the calculator above for a personalized estimate based on your specific financial situation.

The 28/36 rule states that your housing costs should not exceed 28% of your gross monthly income (front-end ratio), and your total debt payments including housing should not exceed 36% (back-end ratio).

For instance, with $6,000 monthly income, your housing payment should stay under $1,680 (28%), and total debt including housing under $2,160 (36%).

Most conventional lenders use this guideline, though FHA loans allow up to 31/43%.

No, being approved for a certain amount does not mean you should borrow the full amount.

Lenders calculate the maximum based on your income and debt, but do not account for your lifestyle expenses, savings goals, or future plans.

Financial advisors typically recommend keeping housing costs to 25% or less of gross income to maintain financial flexibility.

Consider factors like job stability, planned children, retirement savings, and emergency funds before committing to the maximum loan amount.

Private Mortgage Insurance (PMI) is required when your down payment is less than 20%, typically costing 0.3% to 1.5% of the loan amount annually (about $50-$200 per month on a $200,000 loan).

This reduces your buying power because it increases monthly housing costs without building equity.

For example, with a $1,800 maximum housing budget, PMI of $150/month means $150 less for principal and interest, reducing your affordable home price by approximately $25,000-$30,000.

PMI can be removed once you reach 20% equity through payments or appreciation.

Lenders include all recurring monthly debt obligations: auto loans, student loans, credit card minimum payments, personal loans, other mortgages, alimony, child support, and the proposed mortgage payment.

They do NOT include utilities, groceries, insurance (except mortgage insurance), or other living expenses.

Only debts with more than 10 months remaining are typically counted.

For credit cards, lenders use either the minimum payment or 1-5% of the balance, whichever is higher, even if you pay in full monthly.

Conventional loans (28/36% DTI, 3-20% down, best rates with 740+ credit) are most restrictive but offer lowest rates.

FHA loans (31/43% DTI, 3.5% down minimum, accept 580+ credit) allow higher ratios but require mortgage insurance for the loan life if down payment is under 10%.

VA loans (41% DTI, 0% down, for eligible veterans) offer the most flexibility with no PMI and lower rates.

USDA loans (29/41% DTI, 0% down for eligible rural areas) have income limits but excellent terms.

Your loan type choice can change your affordable home price by $30,000-$75,000 based on DTI flexibility and down payment requirements.