Aim for a total monthly housing payment at or below 28% to 30% of your gross income, treat your lender’s preapproval number as a ceiling rather than a comfort zone, and expect cash-to-close equal to roughly 2% to 5% of the purchase price on top of your down payment. Pull two to three months of bank and card statements and run an affordability calculator today to turn those targets into real numbers.

TL;DR:

  • Keep total housing costs, including principal, interest, taxes, insurance, and HOA dues, near 28% of gross income; cap all debt payments at 36%.
  • Keep three to six months of expenses untouched, and budget closing costs of 2% to 5% of the purchase price beyond your down payment.
  • Request at least three Loan Estimates and compare origination charges, total loan costs, and APR rather than choosing based on the headline rate alone.
  • Keep maintenance savings separate from emergency reserves, and convert annual upkeep costs into a monthly savings target for repairs and replacements.
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Table of Contents

How to calculate how much house you can afford

Two shortcuts dominate this conversation: the 28% rule and the 3 to 5 times income heuristic. The 28% rule says your total monthly housing cost (principal, interest, taxes, insurance) should stay under 28% of gross monthly income. The related 28/36 rule caps housing at 28% and all debt payments, housing included, at 36%. The income multiplier (3 to 5 times your annual salary) is a rougher starting point and ignores your actual debt load, so it can overstate what you can safely carry if you have a car payment or student loans.

Both shortcuts miss the details that matter in your situation: existing debt, the interest rate you’ll actually qualify for, and local property tax rates. Build your own number instead.

  1. Set your monthly housing ceiling using the 28% guideline on your gross monthly income.
  2. Subtract an estimate for property taxes, homeowners insurance, and HOA dues to find what’s left for principal and interest.
  3. Convert that principal-and-interest figure into a loan amount at a sample rate and term.
  4. Add your planned down payment to the loan amount to get your home price range.

Say your household earns $90,000 a year, or $7,500 a month. If taxes, insurance, and HOA eat $400 of that, you have $1,700 for principal and interest. At a sample 30-year rate, that supports a loan of roughly $270,000 to $290,000 depending on the exact rate.

Before locking in any number, reconstruct your actual spending from statements rather than guessing. The CFPB’s budgeting approach recommends this because idealized monthly averages tend to hide irregular costs that quietly erode your real comfort level.

How to calculate how much house you can afford — overview diagram

What counts in your monthly housing payment

Your mortgage quote is not your housing payment. The full number is often called PITI: principal, interest, taxes, and insurance. Many lenders collect taxes and insurance through an escrow account and roll them into one payment; others let you pay them separately, which can make a loan look cheaper than it is if you’re comparing numbers side by side.

HOA dues, where they apply, are a separate monthly line that some buyers forget to budget until after closing.

  • Estimate property taxes using the county assessor’s site or the seller’s disclosure, not just the listing price times a guessed rate.
  • Pull homeowners insurance quotes early. Rates vary by location, home age, and claims history.
  • Ask for the HOA’s current budget and reserve study, not just the monthly fee, since special assessments can follow a thin reserve.
  • Build in a cushion for utility costs that may run higher than your current rental.

The CFPB warns that property taxes and insurance commonly rise after purchase, so budgeting to the exact quote you see on day one leaves no room for that drift. Our guide to figuring out how much to spend lists these line items in full and is worth running your numbers against before you shop.

Determine your down payment and cash-to-close target

Your down payment isn’t just whatever is left in your checking account. Work backward from your total accessible savings, then subtract everything else that savings has to cover.

  1. Total your liquid savings across checking, savings, and any accounts earmarked for housing.
  2. Subtract a three-to-six-month emergency cushion you will not touch for the purchase.
  3. Subtract estimated moving and furnishing costs and any other near-term savings goals.
  4. Subtract estimated closing costs, typically 2% to 5% of the purchase price.
  5. What remains is your realistic maximum down payment, not the largest down payment a lender would accept.

This sequencing matters because the CFPB’s down payment guidance frames cash-to-close as savings minus reserves minus costs, not savings minus nothing. Skipping the cushion step is the most common way buyers end up house-rich and cash-poor in year one.

The down payment size also drives your monthly payment and PMI exposure. Lower-down-payment options exist for buyers who qualify, including FHA loans with a minimum 3.5% borrower investment under HUD’s mortgage guidance, along with conventional low-down-payment programs and VA or USDA loans where eligibility applies.

Pro Tip: Run your down payment scenarios at 3.5%, 5%, 10%, and 20% before you shop, so you know exactly what each tier costs you in monthly payment and PMI.

Four down payment scenarios and their effects

Budget for closing day and day-one expenses

Closing costs typically fall between 2% and 5% of the purchase price, according to Fannie Mae’s closing cost guidance, and the exact figure depends on your price point, down payment, lender, and local fees. On a $350,000 home, that’s $7,000 to $17,500 in cash beyond your down payment.

  • Lender fees, appraisal, title insurance, and recording charges typically make up the bulk of closing costs.
  • Moving costs and basic furnishings often run from a few hundred to several thousand dollars depending on distance and how empty the new place is.
  • Set aside a small repair or inspection holdback for the issues that always surface in the first month.
  • Earnest money, usually paid early in the process, is credited back toward your down payment or closing costs at closing, not an extra expense on top.

Request Loan Estimates from several lenders before you commit. Comparing them side by side is the fastest way to see which upfront costs are negotiable and which are fixed.

Budget for ongoing homeownership and maintenance

Once you’re in the home, the mortgage is only part of the monthly picture.

  • Keep a maintenance fund separate from your emergency fund so a leaky roof doesn’t eat your job-loss cushion.
  • Budget for landscaping, pest control, and seasonal upkeep that renters never think about.
  • Plan ahead for appliance and system replacements: water heaters, HVAC units, and roofs all have predictable lifespans.
  • Convert your annual maintenance estimate into a monthly savings line so it doesn’t arrive as one painful lump sum.

Fannie Mae recommends keeping home-maintenance savings separate from emergency savings, specifically so repair costs never compete with funds meant for job loss or medical emergencies.

Build a savings timeline to close the gap

Once you know your down payment and cash-to-close target, set a target closing date and divide the gap between your current savings and that target by the number of months until then.

  1. Calculate the dollar gap between what you have and what you need, cushion included.
  2. Divide by your target timeline in months to get a required monthly savings amount.
  3. Automate a transfer to a dedicated savings account the day your paycheck lands.
  4. Decide whether to prioritize high-interest debt payoff or savings first. Debt above 7% or so usually wins that tradeoff.
  5. If closing the gap would drain your emergency fund, push the timeline back instead of the cushion.

Small behavioral shifts add up faster than most people expect: pausing unused subscriptions, cutting one discretionary category for a few months, or picking up short-term side income. A structured approach like the No Spend Reset walks through concrete savings tactics if you want a template rather than building one from scratch.

Pro Tip: Track your actual statements monthly rather than estimating. Buyers who reconstruct real spending consistently find more room, or less, than they assumed.

Use calculators and compare Loan Estimates before you commit

Run an affordability calculator, a mortgage payment calculator, and a closing cost calculator before you shop seriously, since interest rate, down payment size, and local taxes and insurance are the inputs that swing your number the most.

  • Request at least three Loan Estimates so you can compare upfront costs and life-of-loan costs side by side, not just the headline rate.
  • Review the Loan Estimate’s sections on origination charges, services you can shop for, and total loan costs, then check the APR line against the interest rate line.
  • Lean on public tools first: the CFPB’s worksheets and Freddie Mac’s affordability calculators give neutral starting points, while a lender’s own calculator may be built to favor its products.
  • Compare the Closing Disclosure against your original Loan Estimate at closing to catch any costs that shifted.

A broker’s checklist for turning your budget into an offer

Once your number is set, the work shifts from math to execution. A few habits separate buyers who win homes within budget from those who overspend under pressure.

  • Have proof of funds and preapproval ready before you tour homes seriously, not after you find one.
  • Time your earnest money deposit and inspection window so you’re never rushed into a decision.
  • Coordinate your closing date with your lender early. Timeline slips often cost buyers leverage.
  • Favor a clean, well-timed offer over an inflated one. Engineered demand from strong marketing and multiple interested buyers often does more for a seller’s price than any single buyer overbidding alone.

Staying inside your comfort budget while still competing is less about bidding higher and more about removing friction for the seller.

Preapproval is a ceiling, not a target

Lenders calculate how much you can repay, not how much you’ll be comfortable spending. Those are different numbers, and the gap between them is where financial stress usually starts. Choose a purchase price that leaves room for the unexpected and for the savings goals that matter beyond the house itself.

— Mike Velez

How BLDG Realty helps you turn your budget into an offer

Once you know your number, the next challenge is finding the right home at the right moment without drifting over budget during a bidding war. Our VIP Buyer Program coordinates lender shopping, inspection timing, and offer strategy so your search stays anchored to the budget you built, not to whatever feels exciting that weekend.

BLDG Realty

  • We help you line up Loan Estimates from multiple lenders so your financing cost is settled before you’re competing for a home.
  • We time inspections and closing dates to protect your earnest money and your negotiating position.
  • We build offer strategy around your actual ceiling, not a number inflated by competition.

If you’re working through the math above and want a second set of eyes on your range, run your scenario on our Chino Hills mortgage calculator or reach out through the VIP Buyer Program to talk through your timeline and budget together.

This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.

FAQ

What is the 3-3-3 rule for buying a house?

Definitions vary across sources, so treat it as a rough starting heuristic rather than a lender standard, and run your own numbers using the CFPB affordability approach instead.

How much house can I afford if I make $75,000 a year?

The exact price range you can afford depends heavily on your down payment and the interest rate you qualify for, so run the figure through an affordability calculator with your real numbers.

What is the 70-10-10-10 budget rule?

It is not a housing-specific standard, and your mortgage budgeting should still rely on the PITI calculation and the CFPB’s worksheet approach rather than this general split.

What salary do I need to afford a $400,000 house?

The salary needed depends on your down payment, interest rate, and local property taxes and insurance, since those all shift the monthly payment on the same purchase price. A useful first step is working backward from the 28% guideline using your own down payment plan, then confirming the result with a mortgage affordability calculator rather than relying on a single rule of thumb.

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