There are two answers to "how much home can I afford":
- What the bank will approve — usually higher than you'd expect.
- What actually fits your life — usually lower.
Both matter. Here's how to land in the right range.
Start with your monthly comfort number
Pick the highest total monthly housing payment you'd be comfortable paying every month, indefinitely. Not stretched, not "we'd manage" — comfortable. This number includes:
- Principal and interest
- Property taxes (in California, roughly 1.1% – 1.3% of purchase price per year)
- Homeowners insurance ($100 – $250/month for most California homes)
- HOA dues if applicable
- Mortgage insurance (PMI / MIP) if applicable
- Mello-Roos / special assessments (common in newer San Diego and Riverside neighborhoods)
That number — call it P — is your target.
Work backward from P to purchase price
A quick rule of thumb: at 7% rate, $1,000/month of P&I supports roughly $150,000 of loan. So if your comfort number P is $4,500/month, after backing out ~$700 for taxes, ~$150 for insurance, ~$100 for mortgage insurance, you have ~$3,550 for P&I → a loan of about $530,000.
This is rough. Real numbers depend on rate, county, program, and credit. Use it as a starting point, not a finish line.
The 28/36 rule (with a California asterisk)
Lenders traditionally cap your housing payment at 28% of gross monthly income and total debts at 36%. In California, these caps are often stretched because the market demands it — FHA frequently goes to 50%+ DTI, and conventional can reach the high 40s for strong files.
You can qualify at those higher ratios. The question is whether you should. We default to showing clients a few payment options at different DTI levels so they choose with eyes open.
What to do with reserves
Most loan programs require some money in the bank after closing. Beyond the minimum, having 3 – 6 months of housing payments in savings post-close turns a potential disaster (a layoff, a major repair) into an inconvenience.
If hitting that reserve target means buying a slightly less expensive home, that's almost always the right call.
What ages well
- Locking in a comfortable payment. Refinances exist; the chance to buy at your number doesn't always come back.
- Owner-occupant programs. First-time buyer programs and primary-residence pricing are meaningfully better than investment-property pricing.
- A real budget. The mortgage is one number on a longer list. Run the rest before you commit to the mortgage.
Sources
- CFPB — Considering different mortgage options
- Freddie Mac — Buying a home guide
Want the numbers for your situation? Send us a quick note — we'll model two or three scenarios at different price points so you can see the trade-offs side by side.