Figuring out how much house you can afford is more nuanced than a single number. It involves your income, debts, down payment, local property taxes, credit score, and what monthly payment you are actually comfortable with. The bank's maximum approval is not the right target; your comfortable budget is.
The 28/36 rule
The most widely cited affordability guideline uses two thresholds. First, housing costs (principal, interest, taxes, insurance, HOA — PITI) should not exceed 28% of gross monthly income. Second, total debt payments (housing plus car loans, student loans, credit cards) should not exceed 36%. On a $100,000 gross income ($8,333/month): 28% = $2,333 maximum housing payment; 36% = $3,000 maximum total debt. If you have $700/month in existing debt payments, the remaining $2,300 is available for housing.
Why lender maximums are not your target
Modern mortgage guidelines (particularly for FHA and some conventional loans) allow DTI up to 43-50% in some cases. A lender approving you at 45% DTI is not saying 45% is comfortable — it is the regulatory ceiling for that loan type. Most financial planners suggest targeting 28-33% for housing costs, not the regulatory maximum. Buying below your maximum qualification preserves flexibility for income disruptions, major expenses, and life changes.
Interest rate sensitivity
Rate is the most volatile variable in the affordability equation. At a 7% rate, a $300,000 30-year mortgage carries a principal-and-interest payment of about $1,996/month. At 6%, it drops to $1,799. At 5%, it is $1,610. A buyer who qualifies comfortably at 6% may be at the edge at 7% and unable to afford the same home at 7.5%. Run the affordability calculation at the rate you can actually lock in — not the rate you hope to see.
Property taxes: the variable no one discusses enough
Property taxes vary dramatically by state and county — from under 0.5% of home value in some Southern states to over 2% in New Jersey and Illinois. On a $350,000 home, that is $1,750/year at 0.5% vs. $7,000/year at 2% — a $440/month difference. Before committing to a purchase price, look up the actual property tax rate for the specific county. The same home can cost $300-$400 more per month depending on where it is located.
Frequently asked questions
Should I include property taxes in my affordability calculation?
Yes, always. The House Affordability Calculator on WalletCalcs includes a property tax input so the full PITI total is reflected in the estimate — not just principal and interest, which understates the true monthly cost.
What is the fastest way to increase how much house I can afford?
Increasing income is the most powerful lever, but the two most actionable changes are: paying down existing debt (reduces back-end DTI, freeing up more room for a housing payment) and improving credit score (better rates on the same loan amount). A 0.5% rate improvement on a $300,000 mortgage reduces the payment by about $100/month.
Sources and review notes
WalletCalcs uses official consumer finance, tax, labor, and banking references where possible. These links support the general educational guidance on this page;.