This Simple Math Trick Reveals How Much House You Can Afford (No Lender Required)

If you’ve ever asked yourself how much house you can afford but didn’t want to deal with lenders, paperwork, or credit pulls, you’re not alone. In this guide, Michael breaks it down into five easy steps using real numbers and the two most common loan types in the U.S.—conventional and FHA. The difference between them is bigger than most buyers realize, and by the end, you’ll have a much clearer picture of your true buying power.

Step 1: Calculate Your Monthly Income the Way Lenders Do

Let’s start with household income. The average household income in the United States is about $83,000, but to keep things conservative, we’ll round that down to $80,000.

The first step is simple. Take your household income and divide it by 12.
$80,000 ÷ 12 = $6,667 per month.

This number is the foundation of everything that follows. Lenders don’t look at what you bring home after taxes—they look at your gross monthly income to determine how much debt you’re allowed to carry. Once you know this number, you’re ready to figure out what portion of it can go toward a mortgage.

Step 2: Understand Debt Ratios and What Counts as “Debt”

Before running the numbers, it’s important to understand what lenders actually count as debt. Debt includes car payments, minimum credit card payments, student loans, child support, and your future mortgage payment.

What doesn’t count may surprise you. Utilities, phone bills, groceries, and insurance are not included in lender debt calculations, even though they absolutely affect your monthly budget.

With a conventional loan, lenders typically allow up to 45% of your gross monthly income to go toward total debt. Using our $6,667 monthly income, that gives you a total debt allowance of about $3,000 per month.

FHA loans are more flexible. They allow closer to 56–57% of your gross monthly income to go toward debt, which equals roughly $3,667 per month.

If we assume the average household already has $1,000 per month in existing debt, here’s what that means.
With a conventional loan, you’d have about $2,000 per month available for a mortgage payment.
With an FHA loan, you could afford up to about $2,667 per month for your mortgage.

That difference sets the stage for a massive gap in buying power.

Step 3: Turn Monthly Payments Into Real Home Prices

Now let’s convert those monthly payment limits into actual purchase prices. We’ll assume a 30-year mortgage, a 6% interest rate, and a 5% down payment.

With a conventional loan and a $2,000 monthly mortgage payment, that payment supports a loan of about $330,000. Once you factor in a 5% down payment, your total home-buying power comes out to approximately $347,000.

With an FHA loan and a $2,667 monthly mortgage payment, that payment supports a loan of about $440,000. Add in the down payment, and your total purchasing power jumps to around $463,000.

That’s over a $100,000 difference in how much house you can afford—using the same income.

One important note: these numbers do not include property taxes, homeowners insurance, or HOA fees, which can add anywhere from $300 to $500 per month depending on where you live. While lenders may not include those as debt, you should always factor them into your personal comfort level.

The bigger takeaway is this: with the median household income sitting around $83,000, understanding loan types and debt ratios is critical. When you compare these numbers to the median home price in the United States, the affordability conversation becomes even more eye-opening—and that’s exactly what we’ll dive into next, along with why owning a home can be so much more powerful than renting.