You've been scrolling Zillow for months. You found a gorgeous place with a huge kitchen and a backyard. But before you fall in love, there's one question you need to answer: can you actually afford it?
Most people skip this step and end up "house poor" — they can make the mortgage payment, but there's nothing left for life. Let's make sure that doesn't happen to you.
The 28/36 Rule: Your Starting Point
Lenders use the 28/36 rule as a guideline for how much you should spend on housing:
28% Rule: Your total monthly housing payment (mortgage + taxes + insurance) should be no more than 28% of your gross monthly income.
36% Rule: Your total monthly debt (housing + car + student loans + credit cards) should be no more than 36% of your gross monthly income.
Let's Do a Quick Example
Say you earn $75,000 per year ($6,250/month gross).
Using the 28% rule: $6,250 × 0.28 = $1,750/month maximum housing payment.
That $1,750 needs to cover your mortgage principal, interest, property taxes, and homeowners insurance (PITI). In most markets with current rates, that puts you in the $250,000 - $300,000 home price range with 10-20% down.
What Lenders Actually Look At
When you apply for a mortgage, lenders dig into three main things:
1. Your DTI (Debt-to-Income Ratio) — This is the big one. Add up all your monthly debt payments and divide by your gross income. Most lenders want this under 43%, though getting below 36% gives you better rates.
2. Your Credit Score — This determines your interest rate. A 740+ score gets you the best rates. Even a 0.5% rate difference can cost $30,000+ over a 30-year loan. Check your score for free at annualcreditreport.com before you start shopping.
3. Your Down Payment — More down = lower payment and no PMI (private mortgage insurance). PMI typically costs 0.5-1% of your loan annually. On a $300,000 loan, that's $125-250/month you're paying for insurance that protects the lender, not you.
The Costs Everyone Forgets
Your mortgage payment is just the beginning. Budget for these too:
Property Taxes: Vary wildly by location. In Texas, expect 2-3% of home value. In Hawaii, under 0.5%. This can easily add $200-500/month.
Homeowners Insurance: Usually $100-250/month depending on location and coverage.
Maintenance: Budget 1% of your home's value per year. A $300,000 home = $3,000/year ($250/month) for repairs. This isn't optional — things break.
HOA Fees: If applicable, $200-500/month for condos and planned communities.
Closing Costs: 2-5% of the home price, paid upfront. On a $300,000 home, that's $6,000-$15,000.
A More Realistic Budget Framework
Instead of using just the 28% rule, try this more conservative approach:
💡 The CalcDrop Recommendation
Take your monthly take-home pay (not gross) and multiply by 25%. That's your true comfortable housing budget. It's more conservative than the 28% rule, but it leaves room for saving, investing, and actually enjoying your life.
Crunch Your Numbers
Ready to see exactly what you can afford? Use our free mortgage calculator — it factors in taxes, insurance, and even gives you AI-powered insights on whether a home fits your budget.
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More Useful Tools
Rent vs Buy
Not sure if buying makes sense? Compare the long-term costs.
Compare →Savings Goal
Plan how to save for your down payment.
Plan Savings →Debt Payoff
Lower your DTI by paying off debt first.
Make Plan →The Bottom Line
Don't let a lender tell you what you can afford — figure it out yourself. Use the 25% of take-home pay rule, factor in all the hidden costs, and run the numbers with our calculator. A house should make your life better, not make you stressed every month.