How Much House Can You Actually Afford in Your Next Move?

Whether you're buying your first home or upsizing from your current one, one of the biggest mistakes buyers make is confusing "how much a lender will give me" with "how much I can comfortably afford." Just because a bank approves you for a $500,000 mortgage doesn't mean spending that much is smart—or sustainable. Here's how to figure out what you can truly afford in your next home without stretching yourself too thin.

If You're Upsizing: Your Equity Changes Everything (But Don't Get Careless). You have a huge advantage over first-time buyers—equity from your current home. If your home is worth $350,000 and you owe $200,000, you’re sitting on a substantial amount of equity. That's a down payment that can significantly lower your monthly mortgage payment or let you buy more house. But here's the trap: just because you have a big down payment doesn't mean you should max out what the lender approves. Your lifestyle costs will likely increase when you upsize—bigger utility bills, higher property taxes, more maintenance and repairs, possibly HOA fees. Make sure the monthly payment on your new home still leaves room for everything else you want in life.

Start With the 28/36 Rule (But Don't Stop There). Most lenders use the 28/36 rule as a baseline: your housing costs shouldn't exceed 28% of your gross monthly income, and your total debt payments (including your mortgage) shouldn't exceed 36%. For example, if you earn $10,000/month gross, your housing payment should stay under $2,800, and all debts combined should stay under $3,600. This is a good starting point, but it doesn't account for your lifestyle, savings goals, kids' activities, or unexpected expenses. If you're upsizing because you need more space for your growing family, remember that kids get more expensive as they get older—sports, lessons, college savings, family vacations.

Calculate Your True Monthly Housing Cost. Your mortgage payment is just the beginning. You also need to budget for property taxes (which increase with home value), homeowner's insurance, HOA fees (if applicable), utilities (a 3,000 sq ft home costs more to heat than a 1,800 sq ft rambler), maintenance, and repairs. A good rule of thumb: set aside 1-2% of your home's value annually for maintenance and repairs. So if you buy a $500,000 home, budget $5,000-$10,000/year (or $417-$833/month) for upkeep. Bigger, newer homes might be on the lower end; older or larger homes will be higher. Add this to your mortgage payment to get your real monthly housing cost.

Don't Drain Your Equity Completely. If you're upsizing, it's tempting to use all your equity as a down payment to afford more house. But remember: you'll still need cash reserves for closing costs (2-5% of the purchase price), moving expenses, immediate updates or repairs to your new home, and an emergency fund. Putting every dollar of equity into the house leaves you vulnerable if something breaks or life changes unexpectedly. Keep at least 3-6 months of expenses liquid after closing.

Factor in Your Lifestyle and Goals. Lenders don't factor in if you want to travel, save for retirement, help with aging parents, or keep your kids in sports and activities. They need to know if you can make the payment. Before maxing out your budget, ask yourself: What matters to me beyond owning a bigger home? If being house-poor means sacrificing family vacations, retirement contributions, or date nights, you'll resent the house—no matter how beautiful the kitchen is.

Consider the Total Cost of Upsizing. Beyond the mortgage, think about lifestyle creep. A bigger home often means more furniture to buy, potential for higher HOA fees in some neighborhoods, increased heating and cooling costs, etc. Run the numbers on everything, not just the mortgage payment.

Use Real Numbers, Not Pre-Tax Income. Lenders calculate affordability based on gross income, but you live on net income (what actually hits your bank account after taxes, insurance, and retirement contributions). Use your take-home pay to figure out what's comfortable. If your monthly take-home is $7,500 and your mortgage + taxes + insurance is $3,200, that's 43% of your net income—not the 28% the lender calculated. Make sure the math works for your actual budget.

Get Pre-Approved, But Set Your Own Limit. Pre-approval tells you the maximum a lender will give you, but that's often more than you should spend. If you're approved for $550,000 but feel comfortable at $475,000, trust your gut. Buying below your max gives you financial breathing room, reduces stress, and lets you enjoy your new home instead of constantly worrying about the payment. For upsizers especially: you've lived in a home before. You know what monthly payment felt comfortable and what felt tight. Use that experience to guide your decision.

Think Long-Term. Are you planning to stay in this home for 10+ years? Will your income grow or potentially decrease? Are you nearing retirement? Starting a business? Planning more kids? Life changes, and your financial situation might too. Buying at the absolute top of your budget leaves no room for pivots. If there's any chance your situation could shift in the next 5-10 years, build in a buffer.

The Bottom Line: You can afford a home when the monthly payment (including everything) fits comfortably in your budget, leaves room for savings and lifestyle, and doesn't keep you up at night. If you're stressed about the numbers before you even make an offer, the house is too expensive—no matter what the lender says or how much equity you have.

Whether you're buying your first home or upsizing to your forever home, let's sit down and talk through your budget, goals, and timeline. We'll help you figure out what's realistic, comfortable, and sustainable for your life—not just what a spreadsheet says you qualify for.