Purchase Tips · February 8, 2025
How Much House Can You Actually Afford?
Your pre-approval amount is the maximum you can borrow — not what you should spend. Here is how to calculate your true comfortable budget.
Pre-approval shows the maximum you can borrow — not what is comfortable for your life.
The 28/36 Rule
Housing costs should not exceed 28% of gross monthly income. Total debt should stay under 36%.
On $80,000/year ($6,667/month): max housing cost $1,867/month. Max total debt $2,400/month.
The True Monthly Cost of Homeownership
Budget for all monthly costs: principal and interest, property taxes (IL averages 2%+, IN ~1%, FL ~1.1%), homeowners insurance ($100-$200/month), HOA fees if applicable ($50-$500+), and PMI if less than 20% down ($50-$250/month). Additionally budget 1-2% of home value annually for maintenance.
What Lenders Do Not Factor In
Approval calculations ignore 401(k) contributions, childcare costs, savings goals, car repairs, and lifestyle spending. Getting approved for $400,000 means nothing if it forces you to stop saving for retirement.
The Practical Test
If your mortgage will be significantly more than your current rent, practice living on that budget for 3-6 months beforehand. Put the extra amount in savings. This tells you whether the payment is truly comfortable.
After down payment and closing costs, maintain 3-6 months of expenses as an emergency fund.
HMS helps every buyer run real numbers — not just the approval calculation. Call 309-222-8286.