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How much house can I afford? It’s the question every buyer starts with, and the honest answer is that there are two numbers. One is the most a lender will approve. The other is what you can pay every month without squeezing everything else. They’re rarely the same. Here’s how to work out both, using the ratios lenders actually apply, a worked example with a stated mortgage rate, and the costs that don’t show up in a payment calculator.
Start with the rate, because it moves the answer
Mortgage rates change what a given paycheck can buy. Freddie Mac’s weekly survey put the average 30-year fixed rate at 7.40% for the week of October 15, 2026, the same as the week before. A year earlier it was 6.27%. Freddie Mac publishes a new figure every Thursday, so check the latest before you plug numbers into anything. That’s why the answer to how much house can I afford can change from one week to the next. For more on why rates are where they are, see our piece on mortgage rates at 7.4%.
Know the two ratios lenders use
To answer how much house can I afford, lenders look at your debt-to-income ratio, or DTI. The Consumer Financial Protection Bureau (CFPB) defines it as all your monthly debt payments divided by your gross, pre-tax monthly income. Its example: $1,500 for a mortgage, $100 for a car loan and $400 in other debts is $2,000 of debt on $6,000 of income, or 33%.
There are two versions. The front-end ratio is only your housing payment, including principal, interest, taxes and mortgage insurance, as a share of income. The back-end ratio is all your debts, housing included.
You’ll often see a “28/36 rule” in personal finance articles: housing under 28% of gross income and total debt under 36%. We didn’t find that label on the CFPB, Freddie Mac, Fannie Mae or HUD pages we reviewed, so treat it as a conservative rule of thumb, not an official limit. The official numbers vary by program:
Freddie Mac’s consumer guidance puts the housing ratio under 30% and total DTI under 45%. Fannie Mae’s selling guide is stricter on loans a person underwrites by hand: 36% at most, or 45% if you have the credit score and reserves. Loans run through its automated system can go up to 50%. FHA loans have traditionally used 31% and 43%, according to archived HUD materials, though automated approvals can go higher. USDA guaranteed loans use 29% and 41%. Some of those sources are older, so ask a lender for the current limits on the loan type you want.
The CFPB itself says only that different loan products and lenders will have different DTI limits.
How much house can I afford? A worked example
Here’s our own arithmetic, with every assumption spelled out so you can swap in your numbers. These are illustrations, not quotes.
Say you earn $90,000 a year, or $7,500 a month, and carry $400 a month in other debts. You take a 30-year fixed loan at 7.40% with 10% down. We assume property taxes plus homeowners insurance of 1.5% of the price per year, and private mortgage insurance of 0.7% of the loan per year. Those last two are guesses on our part, because local tax rates and insurance premiums vary widely.
Start with the 28% housing limit, which caps the monthly payment at $2,100. Working backward, that supports a home price of about $262,290, with a down payment near $26,229 and a loan near $236,061. The monthly payment splits into about $1,634 for principal and interest, $328 for taxes and insurance, and $138 for mortgage insurance.
Use the 36% total-debt limit instead and the math changes. That’s $2,700, minus your $400 in debts, which leaves $2,300 for housing and supports a price of roughly $287,270. A 43% total-debt limit, the FHA-style benchmark, would stretch the price to about $352,800. It also leaves far less room in the budget.
Rates matter here. Run the same example at last year’s 6.27% and the 28% price rises to about $286,566, roughly $24,300 more house. That gap is the cost of the rate change alone.
One shortcut to avoid: counting only principal and interest against the 28% limit. On this example it would suggest a price near $337,000, which overstates what’s affordable because it ignores taxes, insurance and mortgage insurance.
Count the costs beyond the mortgage payment
An honest answer to how much house can I afford has to include more than the loan payment. The CFPB’s list of monthly housing costs includes principal, interest, property taxes, mortgage insurance, homeowners insurance, any extra insurance like flood coverage, and homeowners association fees. It also tells buyers to plan for maintenance, repairs and utilities, and notes that taxes and insurance can rise over time.
Fannie Mae suggests budgeting 1% to 4% of a home’s value per year for maintenance, closer to 1% for newer homes and toward 4% for homes more than 30 years old. On a $350,000 home that’s $3,500 a year at the low end and $14,000 at the high end.
Upfront costs matter too. The CFPB says closing costs typically run 2% to 5% of the purchase price, not counting the down payment. Fannie Mae puts earnest money at 1% to 3%. The CFPB also suggests keeping a three to six month cushion of savings after you buy, which is where our guide to building an emergency fund comes in.
What down payment do you actually need?
It depends on the loan, and it’s often less than 20%. Your down payment also changes how much house can I afford, because it sets the size of the loan and your insurance costs. The CFPB says conventional loans backed by Fannie Mae and Freddie Mac can require as little as 3%. FHA loans can go as low as 3.5%, according to the CFPB and HUD. VA loans usually require no down payment if you’re eligible and the price doesn’t exceed the appraised value. USDA guaranteed loans also allow no money down, but they’re limited to eligible rural areas and income caps.
Putting down less than 20% usually means paying for mortgage insurance. The CFPB explains that it protects the lender, not you. On conventional loans you can ask to cancel private mortgage insurance when your balance is scheduled to reach 80% of the home’s original value, and it ends automatically at 78% if you’re current on payments. FHA mortgage insurance follows different rules.
Prequalified versus preapproved
Before you shop seriously, get a letter. The CFPB says both prequalification and preapproval letters state what a lender is generally willing to lend, and neither is a guarantee. Lenders use the terms inconsistently. Some call a letter based on information you report yourself a prequalification and one based on verified documents a preapproval. Ask what yours rests on.
For a preapproval, lenders typically review your income, assets, debts and credit history. The letter is tentative and often expires in about 30 to 60 days.
A simple way to set your own limit
To settle how much house can I afford for your own household, take the lender’s maximum and treat it as a ceiling, not a target. Then work backward from a monthly payment you could carry comfortably, including taxes, insurance, mortgage insurance and a maintenance reserve. Try your numbers at a rate a point higher than today’s too, in case you can’t lock quickly. If you’re comparing buying with staying in a current home, our first-time home buyer guide walks through the full financial picture.
This is general information, not financial advice, and your lender can tell you what you’d qualify for.
Editor’s take
The question isn’t how much house can I afford on paper. It’s what payment still lets you save and absorb a surprise repair. Lenders will often approve more than most budgets can comfortably carry, so pick your number before you talk to one. At 7.40%, every point of rate costs real purchasing power, so build the plan around the payment, not the price.
