How Much House Can I Actually Afford? The Real Numbers Behind Home Buying

Here's the uncomfortable truth: 74.9% of U.S. households cannot afford a median-priced new home in 2025, yet banks keep approving mortgages. The disconnect is massive. Banks will approve you for debt-to-income ratios up to 50% in some cases. Conventional loans allow for DTI ratios up to 45% with a strong credit score, while VA loans have a maximum DTI ratio of 41%.

But approval doesn't equal affordability. The reality? The typical household would have to spend about 36% of their monthly income to afford the monthly mortgage payment for the median home. That's already at the upper limit of the 28/36 rule before you factor in maintenance, repairs, and life's surprises.

Consider this: Mortgage payments on the median-priced home in the US are more than double what they were in 2020. For the typical first-time homebuyer loan with a 3.5 percent downpayment, mortgage costs soared from $1,200 per month in 2020 to over $2,500 per month in mid-2025.

The smart money follows a simpler rule: buy a house worth 2-3x your annual income, not the 4-5x that banks will approve. This gives you breathing room for the inevitable—job changes, economic downturns, major repairs, or life events that banks don't factor into their approval algorithms.

The 28/36 rule isn't just lending industry jargon—it's your financial guardrails. The rule suggests that a borrower use no more than 28% of their income on housing, and no more than 36% of their income on overall debts. Breaking it down: The "28" (Front-end ratio): Your total housing costs—mortgage, property taxes, homeowners insurance, and PMI—shouldn't exceed 28% of your gross monthly income.

Housing costs encompass what you may hear called by the acronym PITI: principal, interest, taxes and insurance.

Let's walk through a real scenario. Meet Sarah and Mike, a couple earning $75,000 annually ($6,250 monthly gross income). They have $450 in monthly debt payments (car loan and credit cards).

Your mortgage payment is just the beginning. The hidden costs of homeownership are reaching nearly $16,000 per year nationwide, underscoring the ongoing affordability crisis. That's $1,325 per month on top of your mortgage. Here's where your money really goes: Maintenance and Repairs: $10,946 annually Maintenance costs account for $10,946 of that, while about $2,003 goes toward homeowners insurance and $3,030 toward property taxes.

The maintenance number isn't a typo—it includes everything from HVAC tune-ups to roof repairs to appliance replacements. Experts recommend budgeting 1–4% of your home's value each year for upkeep. That means for a $500,000 home, you should expect to spend $5,000 to $20,000 each year.

The down payment debate isn't just about having cash—it fundamentally changes your monthly costs and long-term financial picture.

If the affordability numbers aren't working in your favor, you have options. Here's how to improve your position: Boost Your Income A higher income means a lower DTI ratio and a better chance of qualifying for a mortgage. You could increase your income by asking for a raise, taking on more hours, adopting a side gig, offering consulting or freelance work, or getting a second job.

Even a $10,000 annual income increase can boost your buying power by $30,000-40,000 in home value under the 28/36 rule.