Start from the payment, not the approval
Lenders approve on ratios that assume your other spending is average. If you have childcare, a chronic health cost, or a savings rate you refuse to cut, the approval number is fiction. Deciding the payment first and solving backwards keeps the rest of your life in the calculation.
The 1% maintenance rule
Roofs, HVAC, water heaters and appliances all fail eventually, and the average works out near 1% of the home's value per year. Newer homes cost less early and more later; older homes cost more consistently. Treating it as a monthly line item rather than a surprise is what separates comfortable owners from stressed ones.
Rate moves matter more than price moves
A one-point rate rise cuts buying power by roughly 10% at the same payment. That is usually larger than the price negotiation you were planning to win. It is also why 'waiting for prices to fall' can backfire if rates rise in the meantime — and why a rate buy-down or an ARM deserves at least a look.
Compare against rent honestly
The real comparison is not payment versus rent. It is payment plus maintenance plus the opportunity cost of the down payment, against rent plus the growth on the money you did not put down. Over short holds, renting usually wins; past roughly five to seven years, buying usually does.
FAQ
What house can I afford for $2,500 a month?
With $55,000 down at 6.75% and typical taxes and insurance, around $360,000–$380,000 depending on local tax rates. Enter your own figures above for a precise number.
Should I use my income or my budget to decide?
Your budget. Income-based rules assume average spending in every other category; only you know whether that is true. Use the income rule as a ceiling and your budget as the actual decision.
How much cash do I need beyond the down payment?
Closing costs of 2–5% of the price, plus moving costs and an immediate repair reserve. Buyers who spend every dollar on the down payment usually finance the first problem on a credit card.
Does the payment include property taxes?
Here, yes — the calculation solves for a price where principal, interest, taxes, insurance, PMI and HOA together equal your stated budget. Calculators that show only principal and interest overstate what you can buy by a wide margin.
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