How much house can you actually afford based on income, debts, and down payment?
The mortgage industry uses specific debt ratios to determine how much they will lend you — but the amount a lender will approve is often more than is actually comfortable to spend. Being approved for a $500,000 mortgage does not mean buying a $500,000 home is a good idea. This calculator gives you the lender's maximum, but your personal maximum should account for your full financial picture: retirement savings, emergency fund, lifestyle goals, and the hidden costs of homeownership.
The standard lender guidelines are the 28/36 rule: your housing costs (principal, interest, taxes, insurance — PITI) should not exceed 28% of gross monthly income, and your total debt payments (housing plus all other debts) should not exceed 36% of gross monthly income. Some lenders now allow DTI ratios up to 43% or even 50% for well-qualified borrowers, but higher DTI means less financial margin for error.
Max housing (28%): $2,100/month for PITI. Max total debt (36%): $2,700/month. If you have $600/month in car and student loan payments, max housing drops to $2,100 (total debt limit: $2,700 - $600 = $2,100, which happens to match the housing limit in this case). At 7% interest, $2,100/month in P&I supports roughly a $315,000 loan. With a 10% down payment, that is a $350,000 purchase price.
Max housing (28%): $3,267/month. With $800/month in existing debts, total debt limit is $4,200, so max housing is $3,267. At 7% for 30 years, $3,267/month P&I supports roughly a $490,000 loan. With 20% down, that is a $612,000 purchase price — and eliminates PMI.
A $400,000 home requires $4,000–$8,000/year in average maintenance. This is not optional — deferred maintenance becomes expensive emergency repairs. Budget $333–$667/month in your mental housing cost, even if it does not show in your monthly payment.
In many markets, property taxes add 25–40% to the base mortgage payment. In New Jersey, Illinois, or Texas, property taxes on a $400,000 home can be $8,000–$12,000/year ($667–$1,000/month). Research local rates before falling in love with a property.
Moving professionally typically costs $1,500–$5,000 locally, more for long-distance. New homes need furniture, window treatments, appliances, and yard equipment. Budget $5,000–$20,000 for first-year setup costs beyond the down payment and closing costs.
If the property has a homeowners association, fees can range from $50/month (basic community) to $1,000+/month (luxury condos, gated communities). Include HOA fees in your housing cost calculation — they are fixed, unavoidable obligations.
Typically 2–5% of purchase price for the buyer — on a $400,000 home, that is $8,000–$20,000 due at closing, on top of the down payment. These include lender fees, title insurance, escrow, appraisal, and prepaid taxes and insurance.