How Much House Can You Afford

The core rule (but don’t rely on it blindly)

Most lenders use the 28/36 rule:

• Spend no more than 28% of your gross monthly income on housing

• Spend no more than 36% on total debts (housing + loans, credit cards, etc.)

🧮 Quick affordability formula

Max Monthly Housing=0.28×Gross Monthly Income\text{Max Monthly Housing} = 0.28 \times \text{Gross Monthly Income}Max Monthly Housing=0.28×Gross Monthly Income

Example:

• If you earn ₱100,000/month →

  
  

  Max housing ≈ ₱28,000/month

🏠 What your monthly payment actually includes

Your “house payment” isn’t just the loan:

• Principal (what you borrowed)

• Interest (cost of borrowing)

• Property taxes

• Insurance (home + sometimes mortgage insurance)

• HOA dues (if applicable)

📊 What affects how much house you can buy

Your price range depends heavily on:

• Income → higher income = higher budget

• Debt → car loans, credit cards reduce your capacity

• Down payment → more cash = lower monthly payment

• Interest rate → small changes = big impact

• Credit score → affects loan approval and rate

⚠️ Reality check (this is where people mess up)

Just because a bank approves you doesn’t mean you should spend that much.

Ask yourself:

• Can I still save at least 20% of my income?

• Can I handle emergencies or job loss?

• Am I okay with maintenance costs?

A safer approach is often:👉 Stay closer to 20–25% of your income, not the full 28%

🧠 Simple example

• Income: ₱80,000/month

• Safe housing budget: ₱16,000–₱22,000/month

Depending on interest rates and loan terms, that might translate to a home price around:👉 ₱2M – ₱3.5M (rough estimate in the Philippines)

Bottom line

You can “afford” a house when:

• The monthly payment feels comfortable, not tight

• You still have room to save, invest, and live