How Much House Can You Really Afford?

February 04, 2026 · EPM Labs

You’ve been scrolling Zillow for months. You found the one — granite countertops, a backyard, maybe even a little office nook. Then you look at the price and wonder: can I actually afford this?

The bank will happily tell you how much they’ll lend you. But here’s the thing most first-time buyers learn the hard way: what the bank approves you for and what you can comfortably afford are two very different numbers.

Let’s break down how to figure out your real number — the one that lets you sleep at night.

The Bank’s Number vs. Your Number

When you get pre-approved for a mortgage, the lender runs your income, debts, and credit through their formula. They’ll often approve you for a monthly payment that eats up 43% or more of your gross income (that’s before taxes).

Sounds generous, right? It is — for them. They’re looking at the maximum you could theoretically pay without defaulting. They’re not factoring in your grocery bill, your car insurance, your Netflix subscription, or the fact that you like to eat out on Fridays.

The bank’s number is a ceiling, not a target.

The 28/36 Rule (And Why It Matters)

Financial planners love the 28/36 rule, and honestly, it’s a solid starting point:

28% of your gross monthly income should be your maximum housing cost (mortgage + taxes + insurance + HOA)
36% of your gross monthly income should be your maximum total debt (housing + car payments + student loans + credit cards)

So if you earn $5,000/month gross:

Max housing cost: $1,400/month
Max total debt: $1,800/month

If you already have $400/month in student loans and car payments, your housing budget drops to $1,400 — or less if you want breathing room.

But Wait — Gross Income Is Misleading

Here’s where most advice falls short. The 28/36 rule uses gross income — your paycheck before taxes, health insurance, and retirement contributions come out.

Your actual take-home might be 25-35% less than your gross. That $5,000 gross might be $3,500 in your bank account.

Suddenly, $1,400 for housing isn’t 28% of what you actually have to spend — it’s 40%. That’s tight.

A better approach: Calculate your housing budget based on your net (take-home) pay. Aim for 25-30% of net income as your all-in housing cost. It’s more conservative, but it’s realistic.

The Costs Everyone Forgets

Your mortgage payment is just the beginning. First-time buyers are consistently surprised by:

Property Taxes

These vary wildly by location. In Texas, you might pay 2% of your home’s value annually. In Hawaii, it’s closer to 0.3%. A $300,000 home in Texas costs $6,000/year in property taxes — that’s $500/month on top of your mortgage.

Homeowner’s Insurance

Budget $100-300/month depending on your area and coverage. Flood zones, wildfire areas, and hurricane-prone regions cost more.

HOA Fees

If your home is in a community with a homeowners association, fees can range from $50 to $500+ per month. And they can increase.

Maintenance and Repairs

The general rule is 1-2% of your home’s value per year. For a $300,000 home, that’s $3,000-6,000 annually. Things break. Roofs leak. HVAC systems die. It’s not a matter of if, but when.

Utilities

If you’re coming from a smaller apartment, your utility bills will likely jump. A house with more square footage means higher heating, cooling, and electricity costs.

The Down Payment Puzzle

You’ve probably heard you need 20% down. That’s $60,000 on a $300,000 home. For a lot of first-time buyers, that’s simply not happening — and that’s okay.

Options exist:

FHA loans: As low as 3.5% down
Conventional loans: Some allow 3-5% down
VA loans: 0% down for eligible veterans
USDA loans: 0% down in qualifying rural areas

The trade-off? Lower down payments usually mean private mortgage insurance (PMI), which adds $50-200/month to your payment. It drops off once you hit 20% equity, but it’s a real cost in the meantime.

How to Calculate Your Real Affordability

Here’s a practical approach:

Start with your monthly take-home pay (after taxes, insurance, retirement)
Multiply by 0.25-0.30 — that’s your target all-in housing cost
Subtract estimated property taxes, insurance, HOA, and PMI — what’s left is your actual mortgage payment budget
Use a mortgage calculator to translate that monthly payment into a home price

For example:

Take-home: $4,200/month
28% target: $1,176/month for housing
Minus $350 for taxes/insurance/PMI: $826/month for the mortgage itself
At 6.5% interest over 30 years, that supports roughly a $130,000 loan
With 5% down, you’re looking at homes around $137,000

Not as glamorous as that Zillow dream home? Maybe not. But you’ll actually be able to furnish it, go on vacation, and handle a surprise car repair without panic.

Try It Yourself

We built a mortgage affordability calculator specifically for this. Plug in your real numbers — income, debts, down payment — and see what you can genuinely afford, not just what a bank will approve.

It takes about two minutes, and it might save you from years of being house-poor.

The Bottom Line

Buying a home is exciting. It’s also one of the biggest financial commitments you’ll ever make. The best thing you can do is go in with clear eyes about what you can actually afford — not what the market says you should want or what the bank says you can borrow.

Your ideal home price is the one that lets you live your life, not just pay your mortgage.

Start conservative. You can always upgrade later. But being stuck in a home you can’t comfortably afford? That’s a stress that follows you everywhere.

Do the math. Be honest with yourself. And when in doubt, aim lower than you think you need to. Future you will be grateful.

📦 Want the complete toolkit? The New Homeowner Starter Kit ($14.99) gives you from budgeting for your first home to managing the ongoing costs. One download, everything you need.

📊 Planning for homeownership? Don’t forget to budget for yard maintenance. MowGuide reviews the best lawn tools at every price point, and Lush Lawns helps you maintain your lawn like a pro — no expensive services needed.

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