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Homebuying
How Much House Can I Afford? The Complete 2025 Guide
8 min read · 2025-04-08
Use these straightforward rules to calculate your true home-buying budget before you start shopping.
Before you fall in love with a home, you need to know exactly how much you can realistically afford — not just what a lender will approve you for. These are two very different numbers.
The 28/36 Rule
Spend no more than 28% of gross monthly income on housing costs (PITI) and no more than 36% on total debt payments. These limits help ensure you're not house-poor.
Step-by-Step Affordability Calculation
- 1Calculate your gross monthly income
- 2Multiply by 28% for max monthly housing payment
- 3Subtract property taxes (~1.1% of home value / 12)
- 4Subtract homeowners insurance (~$150–$200/month)
- 5What remains is your max principal + interest payment
Lenders often approve you for more than you should borrow. Use 28% of gross income as your hard ceiling.
Hidden Costs First-Time Buyers Miss
- Closing costs: 2–5% of loan amount
- Property taxes: 0.5–2.5% of home value per year
- Homeowners insurance: $1,200–$3,000/year
- PMI if less than 20% down: 0.5–1.5% of loan/year
- Maintenance: Budget 1% of home value annually
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