Before starting your home search, one of the most important questions to ask is:
“How much home can I realistically afford?”
The answer depends on more than just the price of the home — it’s about your full financial picture.
The 28% Rule
A common guideline lenders use is the 28% rule.
This means your total monthly housing payment (including mortgage, taxes, insurance, and HOA if applicable) should ideally be no more than 28% of your gross monthly income.
For example:
If you earn $6,000 per month, your housing payment may be recommended around $1,680 or less.
Factors That Affect Affordability
Several key factors determine how much home you can buy:
- Income
- Credit score
- Existing debts
- Down payment amount
- Interest rates
- Property taxes and insurance
Even small changes in interest rates can significantly impact purchasing power.
Monthly Payment vs Purchase Price
It’s important to focus on the monthly payment, not just the home price.
Two homes priced the same can have very different payments depending on:
- Taxes
- HOA fees
- Loan terms
- Insurance costs
The Bottom Line
The best way to understand your true affordability is to get pre-approved and create a personalized plan with a lender and real estate professional.
Buying within your comfort zone helps ensure long-term financial stability and peace of mind.