How Much House Can You Actually Afford? (The Honest Math)

Updated October 2026 · By Jet Ameti, NMLS #757627

Ask the internet how much house you can afford and you’ll get a dozen rules of thumb that all disagree. Ask a lender and you’ll get one number that sounds official but comes with no explanation. Let me give you the actual framework lenders use — and the honest version you should use for yourself.

The 28/36 rule: what lenders actually calculate

Most conventional lending guidelines start with two ratios, both based on your gross monthly income (before taxes):

• Front-end ratio (28%): your total housing payment — PITI, defined below — shouldn’t exceed about 28% of gross monthly income.
• Back-end ratio (36%): your housing payment plus all recurring monthly debts (car payments, student loans, minimum credit card payments, child support) shouldn’t exceed about 36% of gross monthly income.

These are starting guidelines, not hard ceilings. Many loan programs allow higher ratios — some back-end limits run into the mid-40s and higher with strong compensating factors. I explain the full picture in my guide to debt-to-income ratio. The point here: lenders don’t guess at affordability, they ratio it.

PITI, not P&I: the number that actually matters

The biggest mistake first-time buyers make is budgeting for P&I (principal and interest) while ignoring the rest of the payment. Your actual monthly housing cost is PITI:

• P — Principal: the part of your payment that pays down the loan balance.
• I — Interest: the lender’s charge for the loan.
• T — Taxes: property taxes, usually collected monthly into escrow. In Illinois, these are meaningful — some Chicago-area suburbs have effective tax rates several times higher than other parts of the country.
• I — Insurance: homeowner’s insurance, and mortgage insurance (PMI or MIP) if your down payment is below the threshold.

Taxes and insurance alone can add several hundred dollars a month to your payment in Illinois — and they rise over time even when your loan payment doesn’t. Any affordability math that leaves them out is fiction. Run your own numbers with my affordability calculator, which is built on PITI and the 28/36 guideline, then sanity-check the full payment with the monthly payment calculator.

Why the “3x your salary” rule misleads

You’ve probably heard “buy a house worth three times your annual income.” It’s catchy, and it’s wrong in predictable ways:

• It ignores interest rates. The same income supports a very different purchase price depending on what rates are doing. A rule frozen in the era of cheap money breaks in a normal-rate world.
• It ignores taxes and insurance. A home in a high-tax Illinois suburb costs far more per month than the same price tag elsewhere.
• It ignores your debts. Two households earning the same salary — one with no debt, one with a car payment and student loans — have completely different borrowing capacity.
• It ignores down payment. The price you can afford depends heavily on how much you put down, which changes the loan amount and whether you pay mortgage insurance.

Rules of thumb are starting points, not answers. The honest math always comes back to your income, your debts, your down payment, and your local tax reality.

The “honest” part: what you can afford vs. what you should buy

Here’s the part most loan officers won’t volunteer: the maximum you qualify for is not necessarily what you should spend. Qualifying ratios are designed around what lenders can justify, not what lets you sleep at night. Before you shop at your max, ask yourself:

• Do I have 3–6 months of expenses saved beyond the down payment and closing costs?
• Is my income stable, or is some of it variable (overtime, bonuses, commission)? Lenders discount variable income — you should too.
• What are my non-housing goals — retirement savings, kids’ college, a business? A maxed-out housing payment crowds those out.
• Am I comfortable at this payment if taxes or insurance rise?

I’d rather show you a comfortable number and have you thank me in five years than max you out and watch you stress every month. That’s the difference between a salesman and a guide.

Your next step

Run your income and debts through the affordability calculator for a realistic starting range. Then read what lenders actually measure with DTI and what closing costs really look like in Illinois so your budget covers the full picture — not just the loan.