Short Answer
A general rule is that your total monthly housing payment (principal, interest, taxes, and insurance) should not exceed 28% of your gross monthly income, and your total debt payments should not exceed 36% of your income. For a household earning $100,000 per year, that translates to roughly $2,333 per month for housing, which supports a home price of approximately $300,000 to $350,000 depending on interest rates and down payment.
Lenders use two main ratios to determine how much you can borrow. The front-end ratio (housing expense ratio) compares your proposed monthly housing payment to your gross monthly income. The back-end ratio (debt-to-income ratio) compares all of your monthly debt payments, including the proposed housing payment, to your income. Your actual affordable price depends on several variables: your down payment amount (more down means less to borrow), interest rates (higher rates reduce buying power), property taxes (higher taxes mean less available for the loan payment), homeowners insurance, and PMI if your down payment is under 20%. Before you start house hunting, get pre-approved by a lender who will give you a clear picture of your budget. The pre-approval letter will specify the maximum loan amount you qualify for, which directly determines your price range.
Bob's Advice
Redfin Senior Agent · AI Certified Agent
I have seen buyers stretch too far and regret it, and I have seen buyers be too conservative and miss out on the home they really wanted because rates went up. The right number is the one that lets you sleep at night. When we sit down, I will help you think through what a comfortable payment looks like for you, not just what a lender says you qualify for. Let us talk about your goals and find a price range that works for your lifestyle.
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