How much house can I afford?

A common guideline is the 28% rule — your total PITI payment should not exceed 28% of gross monthly income. But a more accurate approach is to calculate from your net take-home pay after subtracting non-negotiable expenses and savings goals.

What DTI ratio do lenders look for?

Most lenders use a 28% front-end ratio for housing costs and a 36% back-end ratio for total debt. Some programs allow higher ratios with compensating factors, but being approved for more does not mean you should borrow more.

Should I buy at the top of my pre-approval amount?

No. Lender maximums use gross income, not net. A $2,800 payment that is 28% of gross income could be 39% of your take-home pay. Always calculate affordability from your actual net monthly income to avoid being house-poor.

How much emergency fund do I need before buying a house?

At minimum, you need 3 months of total expenses including the new mortgage payment in accessible savings, plus closing costs of 2-5% of purchase price, plus the down payment, plus a $2,000-$5,000 moving and setup buffer.

BlueSky FI

Financial Independence forecast

How Much House Can You Actually Afford? | BlueSky FI