You're sitting on the couch, scrolling through Zillow, and you see it. The perfect porch. A kitchen that doesn't look like it belongs in 1974. You start wondering: how much can I borrow for a house without living on ramen noodles for the next thirty years? It's a heavy question. Honestly, the answer the bank gives you and the answer your bank account gives you are usually two very different things.
Lenders look at you as a set of data points. They see your credit score, your gross income, and that car payment you're still chipping away at. But they don't see your taste for expensive coffee or the fact that your best friend is getting married in Italy next summer.
The math behind the curtain
Banks generally lean on something called the Debt-to-Income ratio, or DTI. It sounds technical, but it’s basically just a scale. On one side is how much money you bring in every month before taxes. On the other side is every recurring debt payment you have. We’re talking credit cards, student loans, personal loans, and that monthly payment for the house you want to buy.
Most conventional lenders want your total DTI to stay under 43%. Some aggressive programs might let you push it to 50%, but that’s living on the edge. If you earn $7,000 a month gross, a 43% DTI means your total debt payments shouldn't exceed $3,010. If you already pay $500 for a truck and $300 for student loans, the bank thinks you can afford a $2,210 mortgage payment.
But wait.
That $2,210 has to cover a lot. It’s not just the loan. You’ve got principal, interest, property taxes, and homeowners insurance. If you put down less than 20%, you’re also slapped with Private Mortgage Insurance (PMI). Suddenly, that "big" loan amount feels a lot smaller.
Why the 28/36 rule is kind of a lie
Financial experts often cite the 28/36 rule. It suggests your mortgage shouldn't exceed 28% of your gross income, and total debt shouldn't pass 36%. It’s a safe, "Grandpa-approved" way to look at things.
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However, in 2026, housing markets are weird. In high-cost areas like San Francisco or New York, following the 28% rule is basically impossible for anyone who isn't a tech executive. People are regularly spending 40% or 50% of their take-home pay on housing. Is it risky? Absolutely. Is it the only way to get a roof over your head in some zip codes? Sadly, yes.
You have to decide where your "sleep at night" number is. The bank might say you're cleared for a $500,000 loan, but if that makes you sweat every time you check your balance, it’s too much. Don't let a lender's confidence dictate your lifestyle. They want the interest. You want the life.
The hidden killers of borrowing power
Your credit score is the obvious one. A 760+ score gets you the "teaser" rates you see on billboards. If you’re sitting at a 640, you’re going to pay a massive premium in interest. Over 30 years, a 1% difference in interest rates can cost you $100,000 or more.
Then there’s the down payment.
People think they need 20%. You don’t. FHA loans allow for 3.5% down. Some VA and USDA loans require 0%. But there's a catch. The less you put down, the more you borrow. The more you borrow, the higher your monthly payment. It's a simple, brutal cycle. Also, if you put down 3.5%, your monthly PMI will stick around for a long time, eating into your "fun money" every single month.
Interest rates are the real boss
When interest rates go up, your "borrowing power" takes a nosebleed. If rates jump from 5% to 7%, your buying power can drop by 20% instantly. You might have been able to afford that $450,000 suburban dream in April, but by October, you're looking at a $370,000 fixer-upper.
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It’s frustrating.
You haven't changed. Your job is the same. Your savings are the same. But the "how much can I borrow for a house" math has shifted because the cost of the money itself got more expensive. This is why getting a pre-approval letter is just a snapshot in time. If you don't find a house in 60 or 90 days, that letter is basically scrap paper if the Federal Reserve decides to get spicy with rates.
Real world vs. Bank world
Let's look at an illustrative example.
Imagine Sarah. Sarah makes $100,000 a year. She has no debt. The bank tells her she can borrow $550,000. Sarah is thrilled. But Sarah also loves traveling and has two large dogs that require expensive vet visits. If she takes that $550,000 loan, her monthly payment—including taxes and insurance—might hit $3,800. After taxes, Sarah’s take-home pay is roughly $6,200.
After the mortgage, she has $2,400 left.
Now subtract utilities ($300), groceries ($600), gas ($200), and insurance ($150). She’s left with $1,150. That has to cover car maintenance, emergency savings, those vet bills, and any hope of a vacation. Sarah is "house poor." She has a beautiful home she can never leave because she can't afford the gas to drive anywhere else.
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Don't forget the closing costs
When you're calculating how much can I borrow for a house, you have to remember that "borrowing" costs money upfront. Closing costs are usually 2% to 5% of the home's purchase price. On a $400,000 home, that’s $8,000 to $20,000 you need to have in cash, on top of your down payment.
If you drain every penny you have just to get the keys, you're one broken water heater away from a financial disaster. Expert consensus from places like Bankrate and NerdWallet suggests keeping an emergency fund of 3-6 months of expenses untouched during the home-buying process. If you can't afford the down payment, the closing costs, and the emergency fund, you're probably trying to borrow too much.
The self-employed struggle
If you're a freelancer or own a small business, the bank treats you like a flight risk. They won't look at what you made last month. They want two years of tax returns. And they look at your net income—the amount after all your clever business deductions.
If you made $120,000 but deducted $60,000 in expenses, the bank hears "I make $60,000." Your borrowing power just got cut in half. If you're planning to buy a house in the next two years and you're self-employed, you might actually want to claim more income and pay more taxes just to show the bank you’re "stable" enough for a mortgage. It feels counterintuitive, but that's the game.
Actionable steps to find your real number
Forget the online calculators for a second. They're too optimistic. Do this instead:
- Live the mortgage: Calculate what your new mortgage payment would be. Subtract your current rent from that number. Take the difference and put it into a separate savings account every month for three months. If you feel the sting too much, you’re looking at houses that are too expensive.
- Get a "Soft" Pre-Qualification: Talk to a local loan officer. Not a big national bank, but someone local who knows the property tax rates in your specific county. Taxes can vary wildly from one town to the next, and they significantly impact how much you can borrow.
- Audit your "Zombie" debt: Cancel the subscriptions. Pay off the tiny credit card balance. Lowering your monthly obligations by even $100 can sometimes boost your borrowing power by $15,000 or more because of how DTI ratios work.
- Factor in the "New House" tax: Your first year in a house is expensive. You'll need lawnmowers, curtains, tools, and rugs. If your borrowing limit doesn't leave room for a trip to the hardware store, scale back your search by 10%.
The goal isn't to borrow the maximum. The goal is to borrow the amount that lets you actually enjoy the house you're buying. Owning a home is a marathon, not a sprint. If you start the race out of breath because your mortgage is too high, you're going to have a hard time reaching the finish line.
Check your credit score today and pull your last three months of bank statements. Look at your actual spending—not your "ideal" spending. That’s where your real borrowing power lives. Once you have that number, stick to it, no matter how tempting that granite countertop looks.