You’ll Be Shocked How Much House You Can Actually Afford (Without Talking to a Lender)

If you’ve ever wondered how much house you can afford but didn’t want to sit through lender paperwork or credit pulls, you’re in the right place. In this breakdown, Michael walks through five simple steps to help you estimate your home-buying power using two of the most common loan types in the U.S.: conventional and FHA. The difference between them might surprise you—and it could completely change how you approach buying a home.

Step 1: Start With Your Household Income (And Why It Matters)

To keep things realistic, let’s use the average U.S. household income. Recent data shows the average household earns around $83,000 per year, but to stay conservative, we’ll round that down to $80,000.

Here’s the first calculation. Take your annual household income and divide it by 12.
$80,000 ÷ 12 = $6,667 in gross monthly income.

This number matters because lenders use your gross monthly income to determine how much debt you’re allowed to carry, including your future mortgage payment. Before you even think about house prices, this is the foundation of affordability.

Step 2: How Lenders Calculate Debt (Conventional vs. FHA Loans)

Before running the numbers, it’s important to understand what lenders actually consider “debt.” Debt includes car payments, minimum credit card payments, student loans, child support, and your proposed monthly mortgage payment.

What doesn’t count? Utilities, groceries, phone bills, insurance, and other everyday expenses are not included in lender debt calculations, even though they absolutely impact your real-life 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 equals about $3,000 per month in total allowable debt.

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

If we assume the average household already has $1,000 per month in existing debt, here’s what that leaves you with.
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 alone is huge—and it directly affects how much house you can buy.

Step 3: Turning Monthly Payments Into Real Buying Power

Now let’s translate 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. When you add in a 5% down payment, your total purchasing power comes out to roughly $347,000.

With an FHA loan and a $2,667 monthly mortgage payment, that payment supports a loan of about $440,000. With the down payment included, your total home-buying power jumps to approximately $463,000.

That’s more than a $100,000 difference in purchasing power using the same income.

Keep in mind, 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 count those as debt, you should always factor them into your personal comfort level.

The big takeaway is this: with a median household income around $83,000, the loan type you choose can dramatically impact what you can afford. 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.