How Much House Can You Afford?
Lenders may approve you for more than you can comfortably afford. The true cost of homeownership includes mortgage, taxes, insurance, maintenance, and repairs. Being 'house poor' means having a beautiful home but no money for anything else. This guide helps you find the right balance.
Affordability Guidelines
28% Rule: Housing costs shouldn't exceed 28% of gross monthly income. 36% Rule: Total debt payments shouldn't exceed 36% of gross income. 3x Income Rule: Home price shouldn't exceed 3x annual income (conservative). Down Payment: 20% avoids PMI, but 5-10% is possible. Emergency Fund: Keep 3-6 months expenses after purchase.
Hidden Costs of Ownership
Maintenance: 1-2% of home value annually. Utilities: $200-$500/month depending on size. Property taxes: Increase over time. Insurance: Rising premiums. HOA fees: If applicable. Closing costs: 2-5% of purchase price. Moving expenses. Furnishing and repairs.
Example Affordability Calculation
Annual income: $100,000. Monthly gross: $8,333. Max housing (28%): $2,333/month. Max total debt (36%): $3,000/month. With $500 car payment, max housing: $2,500. Down payment saved: $40,000. Affordable home: ~$350,000-$400,000 with 10% down.
Key Takeaways
Don't rely solely on lender pre-approval. Consider all homeownership costs. Maintain an emergency fund. Buy less than you can afford for flexibility. Factor in future income changes. Use our Home Affordability Calculator for a personalized estimate.