How Much House Can You Actually Afford? Running the 2026 Numbers

Ask a mortgage calculator how much house you can afford and it answers a question about underwriting: the largest loan a lender would be willing to insure against default. Ask your own budget and you get a smaller number, because your budget knows about daycare, the 401(k) you would rather not pause, and the roof that will need replacing in year seven.

Both numbers are worth calculating. The first tells you what you can get approved for, which sets the ceiling. The second tells you what you can live with. This walks through each calculation using September 2026 prices and rates, then shows where the two land for a specific household.

What “afford” means to a lender

Underwriting runs on two ratios, both measured against gross monthly income, the figure before taxes and deductions:

• The front-end ratio, sometimes called the housing ratio: the full monthly housing payment divided by gross income.
• The back-end ratio, or debt-to-income ratio: that housing payment plus every other required monthly payment (car loans, student loans, minimum card payments, child support) divided by the same income.

The thresholds are published. FHA’s handbook sets a baseline of 31% for housing and 43% for total debt on manually underwritten loans, and allows ratios as high as 40% and 50% when the file documents compensating factors such as cash reserves, a minimal increase in housing payment, or residual income.^[1] Fannie Mae allows a maximum debt-to-income ratio of 50% for loans run through Desktop Underwriter.^[2]

There used to be a firmer line. Until 2021, a loan generally had to keep the borrower under a 43% debt-to-income ratio to be a General Qualified Mortgage. The Consumer Financial Protection Bureau removed that limit and replaced it with price-based thresholds, so the legal test now turns on the loan’s rate relative to a benchmark rather than on one DTI number.^[3]

The market you are buying into

Those three numbers explain most of the strain. Freddie Mac’s survey put the 30-year fixed rate at 6.95% in mid-September, with the 15-year at 6.26%.^[4] The National Association of Realtors reported a median existing-home price of $429,100 in August, up 1.6% from $422,400 a year earlier, with sales running at an annual rate of 3.98 million.^[5] Median household income, meanwhile, reached $87,460 in 2025, a record in the Census Bureau’s series and 2.6% above 2024.^[6]

Income growth has not kept up with prices. Harvard’s Joint Center for Housing Studies found home prices up 54% nationwide since 2020, and in 2025 the median existing single-family sales price was nearly five times median household income.^[7] The same report counts a record 22.7 million renter households, 49% of them, paying more than 30% of income for housing, which is the pool most first-time buyers are saving a down payment out of.^[7]

Put the three together and the arithmetic is unforgiving. Financing the median home with 10% down at 6.95% produces a payment near $3,185 a month once you add assumed property tax and insurance, which is about 44% of gross income for a household earning the median. Holding that payment to the traditional 28% would take an income of roughly $136,500.

The squeeze shows up in who is buying. First-time buyers fell to 21% of the market in the National Association of Realtors’ 2025 survey, a record low against a pre-2008 norm of 40%, and the median age of a first-time buyer reached 40.^[8]

The payment is not just the mortgage

The loan payment is the part of the bill that never changes. Everything stacked on top of it does.

Those two smaller segments are the ones that grow. Property taxes rose 31% between 2019 and 2025, and average monthly homeowners insurance premiums jumped 72% over the same period as extreme weather raised claims.^[7] A fixed-rate mortgage fixes the loan payment and nothing else, which is why a household that stretched to 43% at closing can find itself past 50% three years later without having borrowed another dollar. The mechanism that delivers the increase is an annual recalculation of the escrow account, and a shortage raises the payment by more than the bills did, which is worth understanding before the first letter arrives.

Two more line items belong in the estimate. If your down payment is under 20% on a conventional loan, expect private mortgage insurance. You can ask the servicer to cancel it on the date the balance is scheduled to fall to 80% of the home’s original value, and the servicer must end it automatically at 78%.^[9] If the home is in a condominium or a managed community, HOA dues are part of the housing ratio too, and lenders count them.

Maintenance is the cost with no bill and no due date. It arrives as a water heater in February and a driveway in August, which makes it a textbook case for saving a fixed amount monthly against a known but irregular expense rather than hoping the month it lands is a quiet one.

Working out your own ceiling

Take a household with $9,000 a month in gross income ($108,000 a year) and $650 in existing monthly debt payments: a car loan and a student loan. Four different rules produce four different answers.

The spread between the first row and the last is about $190,000 of purchase price, and every row is a real answer to “how much house can I afford.” The pre-approval letter will quote something near the bottom of that table. Nothing obliges you to spend it.

Choosing between them is a budgeting question rather than a mortgage question, and the arithmetic is the same one behind the 50/30/20 split and its needs bucket: housing is already the largest single line in the average American household’s spending, so the share you commit to it decides how much of everything else fits. A payment you can carry is also not the same as a purchase that pays off, which is a matter of how the carrying costs compare with renting the same house.

1. 1
   Start from take-home pay, not gross

   Lenders use gross income because it is easy to verify. You spend net. Work out both ratios on gross for the approval, then check the payment against what actually lands in your account.
2. 2
   Price the whole payment

   Principal, interest, property tax, homeowners insurance, mortgage insurance if applicable, and HOA dues. Ask the listing agent for the current tax bill and get an insurance quote on the specific address before you make an offer.
3. 3
   Subtract the commitments a lender cannot see

   Childcare, tuition, medical costs, retirement contributions, and support you send to family are invisible to underwriting and non-negotiable in practice. Deduct them before deciding what is left for housing.
4. 4
   Test the payment for three months before you sign

   Move the difference between your current housing cost and the proposed one into savings each month. If the three months are uncomfortable, the next 360 will be too, and you keep the money either way.

What the down payment changes

A larger down payment lowers the loan, the payment, and often the rate, and at 20% it removes mortgage insurance. It is also the reason many people wait years to buy. In 2025 the typical first-time buyer put down 10% and repeat buyers put down 23%, the highest for repeat buyers since 2003.^[8]

Going from 3% down to 20% down saves about $483 a month on this home, and requires roughly $73,000 more in cash at closing. Whether that trade is worth waiting for depends on how fast you can save it and what prices do in the meantime, which is a judgment call rather than a calculation. What is not a judgment call: closing costs and moving expenses come on top of the down payment, and buying a house should not consume the cushion that keeps a repair from becoming debt. Keep the reserve that covers a job loss or a broken furnace intact and separate from the down payment fund.

Two things that move the number

The rate. Holding the budget at $2,520 a month, a percentage point in either direction moves the price you can support by tens of thousands of dollars:

Your other debts. The back-end ratio counts required payments, not balances, so retiring a $450 car loan hands that entire amount to the housing side of the ratio. At a 43% limit, clearing $650 a month of payments is worth about $93,000 of purchase price. If you are choosing which loan to attack first, the evidence on avalanche versus snowball ordering is worth reading before you pick.

Run it on your own numbers

Every figure above rests on national medians, and nobody lives in a national median. The two inputs that matter most, your real monthly commitments and your real housing cost today, are already in your transaction history.

In LumaLedger, the Income & spending page adds up what you actually paid over the last six months by category, which gives you the back-end ratio a lender will calculate and the essentials a lender will not. Once you own the home, the Real estate page tracks the property’s value against the mortgage balance, so equity is a number you can look at rather than one you estimate.

LumaLedger

Real estate

$106,600 equity · after $211,400 mortgage

Primary homeZestimate

Single-family · 3 bd · 2 ba

Value

$318,000

Mortgage ··3391

$211,400

Equity

$106,600

Equity over time

Because the mortgage is a liability and the house is an asset, both flow into net worth automatically, and the monthly payment splits itself between interest (an expense) and principal (a transfer that builds equity). That split is the part a spreadsheet usually gets wrong, and it is the difference between a payment that feels like rent and one that is partly saving.

If the answer comes back smaller than you hoped, that is information worth having before an offer rather than after. A house bought at 28% of income leaves room for the years when the roof, the car, and the job all make demands in the same quarter. One bought at 50% needs everything to go right.