Mortgage Basics
How Much House Can I Actually Afford? A No-Nonsense Guide
By Andrew B. Nilssen, NMLS 253300 •June 10, 2026 •3 min read
The most dangerous number in homebuying is the one at the top of your pre-approval letter. It is real, it is accurate, and it is the maximum a loan program will tolerate, not a recommendation for how to live. After 20 years of pre-approving buyers across Minnesota and Wisconsin, here is how I teach people to find their actual number.
How lenders measure affordability
Lending math centers on one ratio: debt-to-income (DTI). Add up your monthly debt obligations, including the proposed full house payment, and divide by your gross monthly income. The CFPB has a clean explainer if you want the formal version.
Two details matter more than the formula:
- The payment that counts is the whole payment: principal, interest, property taxes, homeowners insurance, any mortgage insurance, and HOA dues if they exist. Lenders call it PITI. Online calculators that quote principal and interest alone are flattering you.
- Gross income means pre-tax. Which is exactly why a ratio that satisfies a lender can still feel tight in a checking account that runs on take-home pay.
Many programs approve total DTIs into the low-to-mid 40 percent range, sometimes higher with strong compensating factors. Approval is not the same thing as comfort.
The comfort math I actually recommend
For most households, a full housing payment around 25 to 30 percent of gross income keeps life funded: retirement contributions continue, the emergency fund survives, and a furnace failure is an annoyance instead of a crisis.
Picture a household earning $9,000 gross per month. A lender might bless a total debt load north of $4,000. My comfortable-zone math points at a housing payment around $2,300 to $2,700. That gap between blessed and comfortable is where house-poor stories are born.
You are allowed to stretch toward the top for the right house. The point is to do it on purpose, knowing exactly what you are trading.
The local wrinkles that move your number
Taxes vary town to town, meaningfully. The same list price in Hudson, River Falls, Woodbury, or Stillwater can carry noticeably different tax bills, which means different monthly payments and different qualifying math. Compare actual tax bills, not list prices, and see my MN vs WI closing guide for why the state line changes the line items.
Your loan program changes the payment. Mortgage insurance differs across FHA and conventional, disappears entirely on VA loans, and stays modest on USDA loans in eligible towns. Same house, same price, different monthly cost.
Down payment assistance changes the entry, not the carry. Programs like WHEDA and Minnesota Housing solve the upfront-cash problem brilliantly, but the monthly payment still has to fit your life.
A 10-minute exercise before you call any lender
- Write down your true gross monthly income.
- List monthly debt payments: cars, student loans, credit card minimums.
- Multiply income by 0.28 as a starting housing budget, then by 0.43 to see the approval-style ceiling.
- Sit with the gap. Decide where in it you want to live.
Bring that to a pre-approval conversation and you stop being a spectator. We will turn it into a real budget with today’s rates, actual town-by-town taxes, and the right program for your profile.
Ready for your real number, not the internet’s guess? Book a free discovery call or call or text 651-398-4779.
Final Recap
- Debt-to-income ratio is the core affordability test: monthly debts plus the new full housing payment, divided by gross monthly income.
- Many loan programs allow DTI into the low-to-mid 40s, but maximum approval and comfortable budget are different numbers.
- Count the full payment: principal, interest, property taxes, insurance, and any mortgage insurance or HOA dues.
- Taxes and insurance vary town to town across the valley and metro, so identical list prices can carry different payments.
- Set your own ceiling near 25 to 30 percent of gross income and let the pre-approval confirm it, not stretch it.
Good to know
Frequently Asked Questions
What is a debt-to-income ratio?
Your debt-to-income ratio is your total monthly debt payments, including the proposed full house payment, divided by your gross monthly income. Lenders use it as the primary affordability test, and the Consumer Financial Protection Bureau publishes a clear explainer on how it is calculated.
What DTI do I need to get approved for a mortgage?
Many programs approve total DTIs into the low-to-mid 40 percent range, and certain files with strong compensating factors can go higher. That is the approval ceiling, though, not a recommendation for comfortable living.
How much income do I need for a $300,000 house?
It depends on your down payment, rate, taxes, insurance, and other debts, which together set the monthly payment that has to fit your DTI. Two households buying the same $300,000 house can need meaningfully different incomes, which is why a pre-approval beats any online rule of thumb.
Should I borrow my full pre-approval amount?
Usually not. The pre-approval marks the most a program will allow, while a sustainable budget usually sits comfortably below it, leaving room for savings, repairs, and the rest of your life. Shopping a notch under your maximum also strengthens your negotiating position.
Do property taxes change how much house I can afford?
Significantly. Taxes are part of your monthly payment, and they vary noticeably between towns on both sides of the St. Croix. The same list price in two different towns can produce payments that differ by a meaningful amount each month, which changes what you qualify for and what feels comfortable.
