How Much House Can You Really Afford? The Complete 2026 Guide
Banks will approve you for more than you should spend. Here is how to find the number that keeps you financially healthy.
The bank says you qualify for $450,000. Your gut says that feels like too much. Your gut is right. Lenders approve based on the maximum you CAN pay, not the maximum you SHOULD pay. The 28/36 rule provides the guardrails: spend no more than 28% of gross income on housing (mortgage, taxes, insurance) and no more than 36% on total debt.
The Real Calculation
Start with your gross monthly income. Multiply by 0.28 for your maximum housing payment. Subtract estimated property taxes (1-2.5% of home value annually, divided by 12) and homeowner insurance ($100-250/month). What remains is your maximum principal and interest payment. At 6.5% for 30 years, every $100,000 borrowed costs approximately $632/month. An $85,000 income means $1,983 max housing payment. After taxes and insurance: roughly $1,500 for P&I, which supports about $237,000 in borrowing. Add your down payment for maximum purchase price.
What Banks Do Not Tell You
The 28% rule does not account for: retirement savings (you should save 15-20% of income), childcare ($1,000-2,500/month), home maintenance (1-2% of home value annually), or lifestyle spending. Many financial planners recommend 20-22% of gross income on housing for a comfortable life. That drops the affordable price by 20-30% compared to the bank maximum.