A lender's approval tells you the maximum they are willing to risk. It is not advice about what you can comfortably carry, and treating it as such is how people end up house-poor with a nice kitchen and no savings.
The 28/36 guideline
A long-standing rule that still holds up: housing costs at or below 28% of gross monthly income, and all debt payments combined, including student loans and car payments, at or below 36%.
Housing costs here means the full payment: principal, interest, property tax, homeowners insurance, mortgage insurance if applicable, and any association fees. Not just the mortgage.
The costs that ambush first-time buyers
- Closing costs, commonly a few percent of the purchase price, due at closing on top of your down payment.
- Private mortgage insurance if you put down less than 20%. It protects the lender, not you, and adds to the monthly payment until you build enough equity.
- Maintenance. A frequently cited planning figure is roughly 1% of the home's value per year. Nothing is the landlord's problem any more.
- Property tax increases. Your assessment can rise after purchase, and your payment rises with it.
Before buying, test it. For six months, put the difference between your current rent and the projected full housing payment into savings each month. If you can do that without strain, the number is real. If you cannot, you have learned it cheaply.
Student loans and your approval
Student loan payments count in the 36% debt-to-income calculation, which is why they affect how much house you qualify for. Being on an income-driven plan with a low payment can help, though lenders treat those payments differently depending on the loan program.
The short version
- Approval is a maximum, not a recommendation.
- Housing under 28% of gross income, total debt under 36%.
- Budget the full payment, not just principal and interest.
- Test the payment for six months before committing to it.
Common questions
How much should I spend on a house?
A common guideline is total housing costs at or below 28% of gross monthly income, with all debt payments together under 36%.
Do student loans affect how much house I can buy?
Yes. Student loan payments count toward your debt-to-income ratio, which lenders use to set your maximum loan amount.
How much should I save beyond the down payment?
Closing costs are typically a few percent of the price, and an emergency fund matters more once you own, since repairs become yours.