Q: 1. What is the 28/36 rule for buying a home?

This rule states you should spend no more than 28% of your gross monthly income on a mortgage payment and 36% on total monthly debt payments.

Q: 2. What is house poor?

Being house poor means spending too much on housing, leaving little for savings, emergencies, or other expenses. This happens when homeowners max out their mortgage approval without considering other costs.

Q: 3. How much house can I afford with an FHA loan?

FHA loans allow a higher DTI ratio (up to 50%), meaning borrowers with lower credit scores or smaller down payments can afford more house. However, PMI costs and fees should be factored in.

Q: 4. How much house can I afford with a VA loan?

VA loans have no down payment and no PMI, making them more affordable for veterans. VA lenders typically allow higher DTI ratios (45-50%), meaning you can qualify for a larger mortgage.

Buying a home is one of the biggest financial decisions you’ll make, and if you’ve ever asked yourself, “How much house can I afford?”, you’re not alone. The answer isn’t just about what the bank will lend you—it’s about what comfortably fits into your budget and lifestyle.

Many people assume that if they get approved for a certain loan amount, they can afford that home. But homeownership comes with hidden costs—property taxes, homeowners insurance, maintenance, and unexpected repairs. So, before you dive into house hunting, let’s break down the key factors that influence home affordability, how lenders calculate it, and what you should consider to make a smart, stress-free decision.

Key Factors That Determine Home Affordability

1. Income and Debt-to-Income Ratio (DTI)

Lenders evaluate your gross monthly income and compare it to your monthly debts. The Debt-to-Income (DTI) ratio measures how much of your income goes toward debt payments, including your mortgage.

Ideal DTI: Lenders prefer a DTI below 36%, though some allow up to 50% depending on your credit score and loan type.
DTI Calculation: (Total Monthly Debt Payments / Gross Monthly Income) x 100 + DTI Percentage

For example, if your gross monthly income is $6,000 and your debts (car loan, student loans, credit cards) total $1,500, your DTI would be: ($1,500 / $6,000) x 100 = 25% DTI

2. The 28/36 Rule

A common affordability guideline is the 28/36 rule:

No more than 28% of your gross income should go toward your monthly mortgage payment (including principal, interest, taxes, and insurance).
No more than 36% should go toward total monthly debts (mortgage + other debts).

Example for a $6,000 monthly income:

28% for mortgage: $6,000 x 0.28 = $1,680 max mortgage payment
36% for total debts: $6,000 x 0.36 = $2,160 max total debt payments

3. Credit Score

Your credit score affects the interest rate you qualify for. Higher scores get better mortgage rates, which reduces monthly payments.

740+: Excellent (best rates)
620-739: Good to fair (higher rates)
Below 620: Limited options; FHA or VA loans may be needed

4. Down Payment

The more you put down, the less you borrow:

20% or more: No Private Mortgage Insurance (PMI)
10-19%: PMI required, but lower than minimal down payments
3-5%: Minimum for FHA or conventional loans

Check out our Down Payment Calculator

5. Loan Term and Interest Rates

A 30-year mortgage has lower monthly payments than a 15-year mortgage, but you’ll pay more in interest over time. Interest rates also impact affordability—higher rates mean higher payments.

How Much House Can I Afford With Different Loan Types?

FHA Loan

Credit Score: 500+ (with 10% down) or 580+ (with 3.5% down)
DTI Ratio: Up to 50%
Down Payment: 3.5% minimum

Example: With a $6,000 income, FHA allows up to $3,000 in total debt payments (50% DTI), meaning a mortgage of around $2,000-2,500 depending on other debts.

VA Loan (For Veterans & Active Military)

Credit Score: No official minimum (usually 580-620+ recommended)
DTI Ratio: Up to 50%
Down Payment: 0%
No PMI required

With a VA loan, a borrower with a $6,000 income could afford a $2,000-$2,500 mortgage, similar to an FHA loan but without mortgage insurance costs.

Explore Our Mortgage Calculators

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Mortgage Calculator

Easily calculate your mortgage payments with our quick and intuitive tool.

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FHA Loan Calculator

Learn about FHA loans and how they can help you purchase your dream home.

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VA Loan Calculator

Explore VA loan benefits designed specifically for veterans and active-duty military.

How to Lower Your Monthly Mortgage Payment

Increase Your Down Payment: Reduces loan amount and eliminates PMI.
Choose a Longer Loan Term: 30-year loans have lower monthly payments.
Improve Your Credit Score: Better rates reduce interest costs.
Pay Off Other Debts: Lower DTI helps qualify for larger loans.
Shop for Lower Interest Rates: Compare multiple lenders for the best deal.

Tips to Lower Your Mortgage Payment

Final Thoughts: How Much House Can I Afford?

Determining how much house you can afford requires a mix of lender guidelines and personal budgeting. While the 28/36 rule is a great starting point, factors like DTI, credit score, and down payment will influence affordability. Use mortgage calculators, compare loan options, and ensure your future mortgage fits comfortably within your budget.

FAQs

1. What is the 28/36 rule for buying a home?

This rule states you should spend no more than 28% of your gross monthly income on a mortgage payment and 36% on total monthly debt payments.

2. What is house poor?

Being house poor means spending too much on housing, leaving little for savings, emergencies, or other expenses. This happens when homeowners max out their mortgage approval without considering other costs.

3. How much house can I afford with an FHA loan?

FHA loans allow a higher DTI ratio (up to 50%), meaning borrowers with lower credit scores or smaller down payments can afford more house. However, PMI costs and fees should be factored in.

4. How much house can I afford with a VA loan?

VA loans have no down payment and no PMI, making them more affordable for veterans. VA lenders typically allow higher DTI ratios (45-50%), meaning you can qualify for a larger mortgage.

5. How much should I spend on a house?

The ideal amount depends on your financial goals, but most experts recommend spending no more than 3-4 times your annual income on a home.

How Much House Can I Afford?

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