Lenders will often approve you for more than you should comfortably spend. The goal is not the biggest loan you can get — it is a payment that leaves room for everything else in your life. Here is a simple, honest framework.
Start with the 28/36 rule
This long-standing guideline says:
- 28% — your total housing payment should stay under about 28% of your gross monthly income.
- 36% — all your debt payments combined (housing plus car loans, student loans, credit cards) should stay under about 36%.
On a $90,000 salary ($7,500 a month), 28% is about $2,100 for housing, and total debt should stay under about $2,700. Many lenders allow higher ratios, but staying near these keeps you safely inside your means.
Remember it is PITI, not just the loan
Your monthly housing cost is more than principal and interest. It also includes property taxes, homeowners insurance, and often PMI (if your down payment is under 20%) and HOA fees. Together these are called PITI. They can add hundreds of dollars a month, so always include them when you test affordability — the mortgage calculator has fields for each.
Your down payment changes everything
A larger down payment lowers the loan amount, the monthly payment, and the total interest — and reaching 20% lets you avoid PMI entirely. But do not drain your savings to get there; you still need an emergency fund and money for moving and repairs. A 10–20% down payment with a healthy cushion usually beats 20% with no reserves.
Do not forget the hidden costs
Beyond the monthly payment, budget for closing costs (2–5% of the price), maintenance (a common rule of thumb is 1% of the home's value per year), utilities, and furnishing. A home that fits your mortgage payment but leaves nothing for upkeep is not truly affordable.
Test a realistic number
Work backward: decide on a comfortable total monthly payment, then use the mortgage calculator to find the home price that produces it at today's rates — including taxes, insurance and PMI. That price, not the bank's maximum, is your real budget.