What the bank will approve and what you can actually afford comfortably are two different numbers. Banks maximise what they'll lend. Your job is to figure out what leaves room for everything else in your life.
Your monthly housing payment (mortgage principal + interest + property tax + insurance) should not exceed 28% of your gross monthly income. On $6,000/month gross income, that's a max of $1,680/month in housing costs.
Same as above, plus: all debt payments combined (housing + car + student loans + credit cards) should not exceed 36% of gross income. This is the standard lender qualification rule. Many modern lenders allow up to 43%.
Your home purchase price should not exceed 3× your annual gross income. On a $80,000 income, that's $240,000 maximum. In high cost-of-living cities this rule is widely broken — which is why many buyers in expensive markets are permanently house-poor.
| Interest Rate | Max Monthly Payment (28%) | Approx. Home Price |
|---|---|---|
| 5% | $1,680 | ~$313,000 |
| 6% | $1,680 | ~$280,000 |
| 7% | $1,680 | ~$253,000 |
| 8% | $1,680 | ~$229,000 |
Assumes 20% down payment, 30-year term, excluding taxes and insurance.
Enter purchase price, down payment, interest rate and term to see your exact monthly payment and total cost.
Open Mortgage Calculator →The mortgage payment is only part of the cost of owning a home. Budget for:
A common mistake: buyers stretch to afford the maximum mortgage, then find they can't afford the maintenance, taxes and utilities on top.
A larger down payment reduces your monthly payment and eliminates PMI (private mortgage insurance, typically 0.5–1% of the loan amount annually) once you reach 20% equity. On a $300,000 home, PMI might cost $125–250/month — significant over several years. Every additional $10,000 in down payment saves roughly $50/month in mortgage payment at current rates.