Your Finances
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How Much House You Can Afford
Maximum Home Price
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Maximum Loan Amount—
Estimated Monthly Payment—
Monthly Income—
Front-End DTI (housing only)—
Back-End DTI (all debts)—
How Lenders Determine What You Can Afford
Mortgage lenders use debt-to-income (DTI) ratios to determine how much they'll lend you. The two key ratios are front-end DTI (housing costs only) and back-end DTI (all monthly debt payments). Most conventional loans require a back-end DTI of 43% or less, though some programs allow up to 50%.
The 28/36 Rule
A common guideline is the 28/36 rule: spend no more than 28% of your gross monthly income on housing costs, and no more than 36% on total debt (housing + all other debts). This is more conservative than what lenders technically allow, which is why many homebuyers find themselves "house-poor" — approved for a mortgage that stretches them too thin.
What Counts in Your DTI?
- Front-end (housing): Principal, interest, property taxes, insurance, HOA fees, PMI
- Back-end (all debts): All of the above + car loans, student loans, credit cards, personal loans
- Not included: Utilities, groceries, subscriptions, gas, or other living expenses
Frequently Asked Questions
How much should I really spend on a house? ▼
Just because a lender approves you for a certain amount doesn't mean you should spend it. A safer rule of thumb is to keep your total housing payment (PITI) at or below 25–28% of your gross monthly income, leaving room for retirement savings, emergencies, and lifestyle expenses. Many financial advisors recommend spending no more than 2–3× your annual income on a home purchase.
What is PMI and when can I avoid it? ▼
Private Mortgage Insurance (PMI) is required by most conventional lenders when your down payment is less than 20% of the home's price. It typically costs 0.5–1.5% of the loan amount annually, added to your monthly payment. PMI is automatically removed when your loan balance reaches 78% of the original purchase price, or you can request removal at 80%. Putting 20% down avoids PMI entirely.
Does my credit score affect how much I can borrow? ▼
Yes, significantly. A higher credit score qualifies you for lower interest rates, which means a lower monthly payment for the same loan amount — effectively allowing you to borrow more. The difference between a 620 and 760 credit score on a $300,000 mortgage can mean 1–1.5% higher interest rates, adding $200–$300/month and over $70,000 in total interest over 30 years.