How Much House Can You Actually Afford?
The 28/36 rule, debt-to-income limits, and the costs lenders don't include in their calculations.
Lenders pre-approve based on a snapshot of your income and existing debt — but they don't account for property tax escalation, maintenance, utilities, or the inevitable lifestyle expenses that come with homeownership. The honest affordability number is usually 10-25% lower than what a lender will approve.
The classic rules
28/36 rule: housing costs (PITI — principal, interest, taxes, insurance) should be no more than 28% of gross monthly income. Total debt (housing plus all other debt payments) should be no more than 36%.
FHA loans allow ratios up to 43% in some cases. That doesn't mean you should — borrowing the maximum routinely leaves homeowners 'house poor' with no margin for repairs or emergencies.
What lenders ignore
Maintenance: budget 1% of home value annually over the long run. A $400k home averages $4,000/year. HOA fees if applicable. Utility costs (often 2-3x apartment levels). Property tax increases (reassessments routinely jump 20-50% after sale in many states).
Major systems replacement: HVAC ($8,000-$14,000 every 15-20 years), roof ($10,000-$20,000 every 25-30 years), water heater ($1,500-$3,500 every 10-15 years). Budget separately or risk being unable to make essential repairs.
A realistic affordability formula
Take 25% of gross income for housing (rather than 28%). Subtract 1% of home value for maintenance reserves. The result is what you can sustainably afford without becoming house-poor.