Lenders answer this with two ratios and your down payment. Here's how to estimate your real budget before you shop.
The classic guideline says housing costs should stay at or below 28% of your gross monthly income, and all debt payments at or below 36%. So if you earn $7,000 a month, aim for a housing payment around $1,960 and total debt under $2,520. These are starting points, not hard limits.
Lenders decide mainly on your debt-to-income ratio. Many conventional loans allow a back-end DTI up to 45%, and FHA up to ~43–50%. A higher allowance means a bigger approval — but borrowing the maximum leaves little cushion if rates or expenses rise.
Affordability is about the whole housing payment, not just principal and interest. Property taxes, homeowners insurance, PMI (if your down payment is under 20%), and HOA dues all add up — often hundreds of dollars a month. Build them in with our mortgage payment calculator.
A larger down payment lowers your loan amount, your monthly payment, and can eliminate PMI once you reach 20% equity. It also strengthens your application. Even a few percentage points more down can meaningfully expand the price range you qualify for.
On a $7,000 monthly income with a $400 car payment and $100 in other debt, the 36% rule leaves about $2,520 − $500 = $2,020 for housing. After taxes and insurance, that might support a loan around $250,000–$290,000 depending on your rate — before your down payment is added to get the home price.