There are two answers to this question: what a lender will approve and what you are comfortable paying. They are often different.
What lenders look at
Lenders compare your monthly debts with your gross income. A common guideline is that housing should be no more than about 28% of gross income and total debts no more than about 36%, although many loan programs allow higher. Credit history, savings and employment stability matter too.
Turn income into a price
Take gross monthly income, apply the percentage limits, subtract insurance and HOA dues, then solve for the home price that fits the remainder with your rate, term and down payment. The mortgage affordability calculator does this for you.
Costs that shrink your real budget
- Property taxes, which vary a great deal by location.
- Homeowners insurance, which can be high in areas with severe weather risk.
- Maintenance and repairs, which many owners plan for as an ongoing cost.
- Utilities that may be higher than in a rental.
- Closing costs and moving expenses.
Set a comfortable number
Look at your take-home pay, not gross, and choose a payment that still leaves room for retirement saving and an emergency fund. Use the budget calculator to test it. Check your ratios with the debt-to-income ratio calculator.