“Can I Afford This?” Checklist
Payment fit is more than pre-approval math
A lender will tell you what you can borrow. That number is based on your gross income and your reported debts, and it knows nothing about your childcare bill, your retirement contributions, or how you want to spend the next ten years. Approval and affordability are different questions.
Start with the standard ratios
The common guideline is that total housing cost stays at or below 28% of gross monthly income, and all debt payments stay at or below 36%.
On a $110,000 household income, that is about $2,567 a month for housing and $3,300 for everything including car loans and student debt.
Lenders frequently approve well past those ratios — debt-to-income limits of 43% to 50% are routine. Approval at that level is a statement about default risk, not about comfort.
Use the number that includes everything
Take the P&I from this calculator, then add property taxes, insurance, any PMI, any HOA fee, and 1% of the home value annually for maintenance.
On a $400,000 home with $320,000 borrowed at 6.5%, that is roughly $2,023 of P&I plus $500 taxes, $175 insurance, and $333 maintenance — about $3,031 a month.
Compare that against the 28% figure, not the P&I alone. This is where most affordability mistakes are made, and they are made before the offer is written.
- Housing at or below 28% of gross income is the usual guideline.
- Total debt at or below 36% of gross income.
- Lenders often approve up to 43% to 50%, which is not the same as affordable.
- Include taxes, insurance, PMI, HOA, and maintenance in the test.
- Keep three to six months of expenses after closing.
The questions the ratios miss
Do you still contribute enough to get the full employer retirement match after this payment? If the answer is no, the house is too expensive at any approval level.
Would you have three to six months of expenses in cash the day after closing? Buying with empty reserves is how a manageable payment becomes a credit card balance within a year.
Could you cover this payment on one income for six months? For a two-earner household that is the single most useful stress test available.
What a lender approves is not a budget
Underwriting looks at your income, your credit, and your existing debt payments. It does not know that you want to retire at sixty or that childcare starts in two years.
A pre-approval for $520,000 is a statement about default risk, not a recommendation. Plenty of people are approved for payments that would consume every dollar of their flexibility.
The more useful exercise is deciding your own maximum payment first, then working backward to a price range, and treating the pre-approval number as an irrelevant ceiling.
Write your number down before you talk to a lender. It is much harder to hold the line after someone has shown you what you could theoretically borrow.
Time horizon and the cost of leaving early
Buying and selling a home costs roughly 8% to 10% of the price in transaction fees across both ends. On a $400,000 house that is $32,000 to $40,000.
You need either meaningful price appreciation or several years of amortization to overcome that. Under five years, buying frequently loses to renting on pure math.
If your job, your city, or your household composition is likely to change soon, that uncertainty belongs in the decision alongside the payment.
Holding your number under pressure
Decide your maximum before you start touring houses, write it down, and give it to whoever is making the decision with you. A number chosen calmly in a kitchen survives better than one defended in a bidding war.
Expect pressure in both directions. Agents are paid on the sale price, lenders approve more than is comfortable, and a house you love makes an extra $300 a month sound trivial.
It is not trivial. $300 a month for thirty years is $108,000, and it is the difference between a payment you barely notice and one you resent every January.
Try these inputs
- Comfortable: $320,000 loan, 6.5%, 30 years
- Stretch: $380,000 loan, 6.5%, 30 years
- Conservative: $280,000 loan, 6.5%, 30 years