The question every buyer asks first is also the one most people get wrong. Lenders approve you for far more than you should comfortably borrow, because their job is to lend, not to protect your budget.
The most reliable rule of thumb is simple: your total housing payment should stay under 28% of your gross monthly income. That payment includes principal, interest, property tax and insurance — the full PITI, not just the loan.
Divide your monthly PITI by 0.28 to see the income it requires. A $2,500 payment needs about $107,000 a year in income.
Lenders use gross income because it is a consistent, verifiable number. But you pay bills out of net income. If you have student loans, car payments or a high-tax state, subtract those first.
Lenders also look at your total DTI — all monthly debts divided by gross income. Most want it under 36%, with housing under 28%. That leaves 8% for everything else, which is tight.
Many financial planners suggest staying under 25% of net income. It is more conservative but leaves room for maintenance, emergencies and savings.
Try it yourself with our salary-based calculator, then adjust for your own state with the main mortgage calculator.
Reading is step one. Step two is running your own numbers — taxes, insurance, PMI and all.
Open the mortgage calculator