How Much House Can You Really Afford?

Buying a house is like buying a car—the sticker price is just the beginning. You wouldn’t budget for a vehicle without considering gas, insurance, maintenance, and the occasional repair bill. Yet millions of homebuyers fixate on the purchase price while ignoring the ongoing costs that actually determine whether they can afford their lifestyle. The mortgage payment is rent you pay to the bank; true homeownership costs include everything it takes to keep a roof over your head and in good condition.

The 28/36 Rule: A Useful Guardrail, Not Gospel

Lenders use the 28/36 rule as a quick gut-check: your total housing costs (principal, interest, taxes, and insurance—known as PITI) shouldn’t exceed 28% of your gross monthly income, and your total debt payments (housing plus car loans, student loans, credit cards) shouldn’t exceed 36%. These thresholds help lenders manage their risk, but they were never designed to optimize your life.

Here’s the catch: lenders will often approve you well beyond these guidelines if you have strong credit or other compensating factors. A bank might greenlight you for 35% or even 40% of your income going to housing. That doesn’t mean you should take it.

Beyond PITI: The True Cost of Homeownership

Your mortgage statement shows principal and interest. Your lender escrow might handle property taxes and homeowner’s insurance. But that’s still not the full picture. True housing costs include several categories that don’t show up on any single bill:

• Maintenance and repairs: Budget 1-2% of your home’s value annually. For a $400,000 home, that’s $4,000-$8,000 per year, or $333-$667 per month set aside.
• Utilities: Homeowners typically pay more for utilities than renters—larger spaces, full responsibility for water/sewer/trash, and no landlord subsidizing anything.
• HOA fees: If applicable, these can range from $100 to $500+ monthly and often increase over time.
• Lawn care, pest control, and other services: Small costs that add up to $100-$300 per month depending on your property.

Location: The Variable That Changes Everything

The same $400,000 home can cost dramatically different amounts to own depending on where it sits. Property tax rates range from 0.3% in Hawaii to over 2% in New Jersey and Illinois. Homeowner’s insurance varies by climate risk—coastal Florida and tornado-prone Oklahoma pay multiples of what someone in Utah pays. A $400,000 home might cost $2,400/month in one state and $3,200/month in another, with identical mortgage terms.

Understanding affordability requires building up the complete monthly cost, layer by layer. Let’s walk through exactly how to calculate what a home will really cost you each month—and why the number is always higher than the mortgage payment alone.

Building the Complete Picture: A $400,000 Home

Let’s break down a realistic scenario: a $400,000 home purchase with 10% down ($40,000), a 7% mortgage rate, and average costs for a moderate property tax state.

Cost Comparison Across Price Points

How do these numbers scale? Here’s what true monthly costs look like at three different price points, assuming the same 10% down payment, 7% rate, and moderate-tax location:

A Tale of Two Buyers: The Approval Trap

Consider Maya and David, both earning $100,000 annually with similar financial profiles. They approach homebuying very differently.

The Income Percentage Rule of Thumb

A more practical guideline than the 28/36 rule: keep your true monthly housing cost (not just PITI) under 30% of your take-home pay. For someone with $100,000 gross income and $6,500/month take-home, that means a maximum true cost of around $1,950/month—which typically corresponds to a home price of $250,000-$300,000, not the $450,000 a bank might approve.

You control more levers than you might think. While you can’t change interest rates or local property taxes, you can make strategic choices that dramatically affect what “affordable” means for your situation.

The Four Levers You Control

Reality Check: The Opportunity Cost of Stretching

When you spend an extra $500/month on housing, that money doesn’t just disappear—it comes from somewhere. For many buyers, it comes from their future selves.

What If You’re in a High-Cost Market?

If you live in San Francisco, New York, Boston, or another expensive metro, the math can feel impossible. Here are realistic options:

• Expand your geographic search: A 30-minute commute difference might mean $200,000 less in purchase price.
• Consider a starter home: A smaller condo or townhouse builds equity while keeping costs manageable. You don’t have to buy your forever home first.
• Be honest about trade-offs: If comfortable homeownership requires 50%+ of your income, you’re not ready to buy in that market yet—and that’s okay. Continuing to rent while saving aggressively is a valid financial strategy.
• House-hack: Buying a duplex or a home with a rentable unit can offset hundreds per month, but factor in landlord responsibilities.

What If You’re Already Stretched?

If you’ve already bought and your housing costs feel overwhelming, you have options. Refinancing when rates drop can provide relief. Renting out a room or basement adds income. Aggressively paying down other debts frees up cash flow. In extreme cases, selling and downsizing—while emotionally hard—might be the financially smart move. A house that drains your savings and prevents retirement contributions is a liability, not an asset.

Ready to find your real number? Use the calculator below to see what you can comfortably afford based on your income, debts, and down payment—not just what a lender might approve. Enter your actual numbers and see the complete picture, including the often-overlooked costs that determine true affordability.

Quick Start Calculator

What to Look For in the Results

This calculator provides estimates for educational purposes only. Actual costs vary based on specific lender requirements, local tax rates, insurance quotes, and property conditions. Results do not constitute mortgage pre-approval or financial advice. Consult with a mortgage professional and financial advisor before making home purchase decisions.