How much house can I afford?
Last updated August 31, 2026
Lenders answer this with two ratios. Keep your housing payment near 28 percent of gross monthly income and all your debts together near 36 percent, and you fit the classic box. Your real budget is a different number, and it should be lower. This page shows you both, plus the costs the online calculators skip.
Two numbers decide this whole question. What the bank will lend you, and what you can carry without losing sleep. Learn how each one gets computed, then buy off the smaller one.
How do lenders decide how much I can borrow?
Underwriting runs on debt-to-income ratios, DTI for short. The math is simple division, and it has been stable for decades.
Your full monthly housing payment divided by your gross monthly income. Gross means before taxes. The classic target is 28 percent.
Housing payment plus every other monthly debt payment, divided by that same gross income. Car loans, student loans, minimum credit card payments, child support. The classic cap is 36 percent.
The housing payment in that math means everything. Principal, interest, property tax, insurance, mortgage insurance if you have it, and HOA dues. Lenders count all of it.
They skip a lot too. Utilities, groceries, daycare, your gym, your savings. None of that appears in DTI. Remember that gap, because it is exactly why the approval number runs hot.
The 28/36 pair is the conservative classic, and it is the math our Purchase Power calculator runs. Real approvals often stretch past it. Strong credit, big reserves, and automated underwriting can push back-end ratios well into the 40s on some programs. Program limits shift, so ask your lender where your file lands.
Why is the lender's number bigger than your real budget?
Because the lender is answering a narrower question than you are. Their question is whether you will repay the loan. Your question is whether you will still have a life while you do it.
Look at what DTI misses. It uses gross income, and you spend net income. It ignores your 401k contributions. It has no idea your kid starts preschool next year, or that your industry has layoffs every winter, or that you want to keep investing every month. A maximum approval can be a payment that technically clears and quietly eats every spare dollar you have.
So treat the approval as a ceiling. Set your own line below it, at a payment that leaves your savings rate alive. A good test: if the payment would stop you from saving anything, the house is too much house, whatever the lender says.
What is the full monthly payment, really?
Online calculators love to show principal and interest and stop. In Los Angeles and Ventura counties the rest of the line is large. Count all six pieces.
The loan payment itself. Fixed for the life of a fixed-rate loan.
Roughly 1 percent of your purchase price per year as a base, plus local add-ons. Details below.
Required by every lender. In California this line needs its own section, and it gets one below.
Added when you put down less than 20 percent on a conventional loan. It can be canceled later. FHA loans carry their own version with different rules.
On condos and many planned communities. Lenders count dues in your DTI, and dues can rise by board vote.
Lenders skip this one. Your budget should hold a line for repairs anyway, because roofs and water heaters fail on their own schedule.
What about insurance in California fire zones?
Homeowners insurance used to be a footnote in this math. In parts of our two counties it now decides deals, so check it before you fall in love with a house.
Here is the mechanism. Insurers price wildfire risk by location, and in high-risk zones some decline to write new policies at all. When the private market says no, the California FAIR Plan is the state's insurer of last resort. It covers less and buyers often pair it with a second wrap-around policy, which means two premiums. Your lender will require proof of insurance before closing either way.
Premiums and appetite change constantly, and any dollar figure we printed here would be stale in a season. Do this early: get an actual quote for the actual address during your inspection period, and put that number in your monthly math. Two similar houses a few miles apart can carry very different insurance costs, and the hillside one usually loses.
How much is property tax in California?
Prop 13 makes this the most predictable line on the sheet. The base levy is 1 percent of assessed value, and when you buy, your assessed value is your purchase price. Local voter-approved bonds and assessments stack on top, and those vary by city and school district, so effective rates land a bit above 1 percent and differ from one tax rate area to the next. Budget a little over 1 percent of your price per year, then confirm the exact rate for the address with the county.
After you close, the county caps growth of your assessed value at 2 percent per year. Your tax bill stays tied to what you paid, which is a quiet long-term gift to buyers who hold.
One first-year surprise deserves a flag. The seller's old bill reflects their old assessed value. The county reassesses at your price and mails you a supplemental bill for the difference. It arrives months after closing, and it lands on you. Expect it and it is a non-event.
How much cash do you need beyond the down payment?
The down payment gets all the attention and it is never the whole check. Stack three more piles before you shop at the top of your range.
Loan origination, appraisal, escrow, title, recording, inspections. The buyer wires these to escrow in cash on top of the down payment.
Your first year of homeowners insurance, plus the tax and insurance account many lenders fund at closing. This is your own money going into your own account, and it still has to be wired on closing day.
Cash left over after closing. Some loans require a set number of months of payments in the bank. Require it of yourself even when the loan does not, because year one of any house brings surprises.
Get the full itemized list for your price range in the buyer net sheet. It shows every dollar it takes to close in Los Angeles or Ventura County, line by line, with county customs built in.
A worked example
Everything below is illustrative arithmetic with round numbers. It is a teaching example, and none of it is a quote or a market claim. Your rate, tax rate, and insurance will differ, so run your own figures.
Take a household earning $250,000 a year, which is $20,833 a month gross. The 28 percent front-end cap allows a $5,833 housing payment. The 36 percent back-end cap allows $7,500 for all debts. Say they pay $1,000 a month on a car and student loans, which leaves $6,500 of back-end room. The tighter cap here is the front end at $5,833.
Now test a $900,000 purchase with 20 percent down. The loan is $720,000. At an illustrative 6.5 percent over 30 years, principal and interest come to about $4,551. Add property tax at an illustrative 1.2 percent of price, which is $900 a month, and an illustrative $300 for insurance. The line totals about $5,751. That fits under $5,833, barely, and the back end sits at $6,751 against a $7,500 cap. So this file likely clears at $900,000 and strains above it.
Notice what the example teaches. A quarter-million-dollar income and $180,000 in cash buys a $900,000 house at that rate. That is the honest shape of this market. Move the rate down one point and the same income reaches meaningfully higher, which is why you rerun this math every time your quote changes.
The arithmetic above uses a standard 30-year amortization formula and invented round inputs chosen for clarity. Rates come from your lender, tax rates from the county, and insurance from an actual quote. All three move.
How do you run your own number?
Use the Purchase Power calculator. It runs the same 28/36 DTI math lenders use, on your income, your debts, and your down payment, free with no sign-up. Then take the budget it gives you and see what that money actually buys in each city with What Your Budget Buys, which is built on real closed sales rather than guesses.
The down payment side has its own set of myths, starting with the idea that you need 20 percent. You do not, and we wrote out every option in how much down payment you need in California.
One honest limitation. A calculator screens your budget, and only a lender can approve you. Underwriting reads your actual credit report, your tax returns, and your bank statements, and files surprise people in both directions. Get a real preapproval before you tour homes you would grieve over losing.
This is not tax advice, and it is not lending advice. Loan programs, DTI limits, and insurance availability change, and your own numbers come from your lender, your insurer, and your CPA. Confirm current figures with them before you commit.
Four free tools, no sign-up. See what you can afford with Purchase Power. Compare owning against your rent, year by year, in the payments calculator. Get every dollar it takes to close in the buyer net sheet. When you are ready to look, get listing matches sent as they hit the market.
How much house can I afford?
Start with the classic lender test. Keep your full housing payment near 28 percent of your gross monthly income, and keep all your debts together near 36 percent. Some programs approve well above those lines for strong files, so ask your lender where yours land. Then set your own budget below the approval, because the lender's ceiling ignores your savings goals and your real spending.
What is a good debt-to-income ratio for a mortgage?
Lenders watch two ratios. The front-end ratio is your full housing payment divided by gross monthly income, and 28 percent is the classic target. The back-end ratio adds your other monthly debt payments, and 36 percent is the classic cap. Approvals often go higher with strong credit and reserves. Lower ratios mean cheaper breathing room, and usually better loan terms.
Should I spend as much as the lender approves?
Usually no. The lender checks whether you can repay the loan. Only you know your retirement savings, your kids' costs, your job risk, and how you actually spend. The approval is a ceiling, and ceilings are for not hitting. Buy at a payment that still lets you save every month.
How much money do I need beyond the down payment?
Plan for three more piles of cash. Closing costs cover your loan fees, escrow, title, and inspections. Prepaids fund your first insurance year and the tax and insurance account your lender sets up at closing. Reserves are the cushion lenders like to see and you will definitely want, since the first year of any house brings surprises. A buyer net sheet itemizes all of it before you write an offer.
Summary points
- Lenders compute two ratios from your gross income. Housing payment near 28 percent is the classic front-end target, and all debts near 36 percent is the classic back-end cap. Some programs approve higher.
- The housing payment in that math includes principal, interest, property tax, insurance, mortgage insurance, and HOA dues. Count all six pieces or your budget is fiction.
- The lender's approval answers one question, whether you can repay. It ignores your savings, your childcare, and your net paycheck. Buy below the ceiling.
- In California fire zones, insurance can decide the deal. Get a real quote for the actual address during your inspection period, before you remove contingencies.
- Property tax starts near 1 percent of your purchase price plus local add-ons, and Prop 13 then caps assessed-value growth at 2 percent a year. Expect a supplemental bill a few months after closing.
- The down payment is never the whole check. Closing costs, prepaids, and reserves all land on top, in cash, at closing.
- A worked example at illustrative numbers: $250,000 of income with $1,000 of monthly debts carries roughly a $900,000 purchase with 20 percent down at 6.5 percent. Rerun the math every time your rate quote moves.