DanfioA monthly payment, not a sticker price
Published 2026-09-21 · Last reviewed 2026-09-23
Ask "how much house can I afford" and the answer is usually quoted as a price you can shop for. That is the wrong end to start from. A lender does not cap the sticker price directly; it caps a monthly payment with two debt-to-income limits, and the price is whatever that payment happens to buy. The engine this page runs - the same one the Home Affordability Calculator uses - does that backwards: it fixes the payment a $90,000 a year household can carry and solves for the most expensive house. This guide walks the two limits, then shows what the payment they allow actually buys.
Two lender limits, and the smaller one decides
Lenders draw two lines, both measured against gross monthly income. The front-end limit holds housing to 28 percent: from a gross monthly income of $7,500, that is $2,100. The back-end limit holds housing plus every other debt to 36 percent: 36 percent of that income is $2,700, and with $300 of other payments already committed, the housing portion is $2,400. The engine takes the smaller of the two budgets -$2,100 against $2,400 - so $2,100is the binding number, here the front-end rule at 28 percent.
What $2,100 a month buys
The engine then prices the largest mortgage whose payment lands exactly on that $2,100 - all in. At a 6.5 percent, 30-year rate it finds a loan of $233,585, whose principal-and-interest piece is $1,476a month; add the $274 monthly property tax, $150of insurance and $200 of HOA, and the pieces add back to the budget. With the $40,000 this household has, the price that budget can carry is $273,585 - the top of the range, not a number to aim for, and certainly not a number a lender has promised to lend.
Why the smaller ceiling decides
At this price the household's combined debt-to-income is 32 percent -$2,100 of housing plus $300 of other debt against $7,500 - comfortably under both 36 and the 43 percent qualified-mortgage line. That is the point of the worked example: the front-end rule, not maxed-out debt, is what caps this household's house. Give the same income more other debt and the back-end line slides down to meet the budget; give it less and the front-end rule stays in charge. The two limits are two separate ceilings on the same monthly payment, and the smaller one is the answer.
The down payment is the price's own test
A price is only as reachable as the money at the table. Twenty percent of a $273,585 house is $54,717; with only $40,000 down, the engine flags mortgage insurance as likely (yes). Raise the down payment and the same monthly budget will carry a higher price; drop below 20 percent and an insurance premium climbs into the payment itself. The figure worth arguing about is not the headline price but how much of it you can put down.
Where these numbers come from
- Every figure comes from the same affordability calculation. The $2,100 budget, the $2,400 budget, the $2,100 that binds, and the $273,585 that payment buys all come from the same set of steps the Home Affordability Calculator runs, on the same inputs.
- The 28 and 36 are the starting values. They are the front-end and back-end debt-to-income limits this calculator applies unless you change them, and they are the source of the two budgets above.
- The inputs are the household's and the market's. Income, other debts, down payment, rate, term, property tax, insurance and HOA are supplied; the calculation only caps the payment and works back to the price.
What this guide does not cover
Not covered: a pre-approval or any lender's actual underwriting - 28 and 36 are guidelines, not law, and a lender weighs credit and assets too. Property tax and insurance here are the placeholders entered, which vary by county and by policy, and the monthly figure does not add the mortgage insurance this example flags as likely, nor closing costs or a lumpy repair. Every number above assumes the single fixed 6.5 percent rate and 30-year term entered; change either and the price changes with it. The engine quotes a ceiling from one set of rules and inputs - it quotes nothing about what any specific bank will say yes to.
Enter your own income, debts and down payment in the Home Affordability Calculator, see the two limits stand side by side in the Debt-to-Income Calculator, price a single loan in the Mortgage Calculator, or start from take-home pay in the Paycheck Calculator.
An estimate from lender guidelines - not mortgage, tax, insurance or financial advice. Read the full disclaimer.