The simple answer is a 28/36 rule, but the real answer depends on your specific numbers.
The 28% front-end ratio. Your total monthly housing payment — mortgage principal and interest, property taxes, homeowners insurance, and HOA fees — should not exceed 28% of your gross monthly income. On a $70,000 salary ($5,833/month), that is about $1,633 per month for housing.
The 36% back-end ratio. Your total monthly debt payments, including housing, car loans, student loans, credit card minimums, and any other obligations, should stay under 36% of gross income. That same $70,000 salary allows about $2,100 in total monthly debt payments.
Lenders do not use the rule the same way you do. They look at your debt-to-income ratio, credit history, and available down payment. A higher down payment can push the approval number higher. A lower credit score or significant existing debt pulls it lower.
The part most people miss. Your target price is not the loan amount you qualify for; it is the amount that leaves you comfortable after the payment comes out. Lenders may approve you for a payment that leaves little room for maintenance, repairs, and rising property taxes.
A reasonable starting point is to multiply your annual gross income by roughly 2.5 to 3.5. On a $70,000 salary, that is a home in the $175,000 to $245,000 range — assuming a 10% down payment and moderate property taxes.
This is general information, not professional financial advice. For decisions about your situation, talk to a qualified professional.
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