How Much House Can I Afford? Texas Home Buying Guide
Figuring out how much house you can afford is the essential first step in your home buying journey. Get this right, and you’ll shop with confidence. Get it wrong, and you could end up house-poor or disappointed when your dream home is out of reach.
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The good news? Calculating your home affordability isn’t complicated once you understand what lenders look at. In this guide, I’ll walk you through exactly how to determine your budget—the same way I help my clients every day.
The Quick Answer: The 28/36 Rule
Most lenders use the 28/36 rule as a starting point:
- 28% of your gross monthly income should be your maximum housing payment (mortgage, taxes, insurance, HOA)
- 36% of your gross monthly income should be your maximum total debt (housing + car payments + credit cards + student loans)
Example: If your household earns $8,000/month gross:
- Maximum housing payment: $2,240 (28%)
- Maximum total debt: $2,880 (36%)
But here’s what most articles won’t tell you: these are guidelines, not hard rules. Depending on your full financial picture, you might qualify for more—or decide you’re comfortable with less.
What Lenders Actually Look At
When you apply for a mortgage, lenders evaluate four main factors:
1. Your Income
Lenders want to see stable, verifiable income. This includes:
- W-2 wages and salary
- Self-employment income (typically 2-year average)
- Bonuses and commissions (if consistent)
- Rental income from investment properties
- Retirement income, Social Security, VA disability
Texas Tip
If you’re self-employed or have variable income, we can often use bank statement loans or other flexible programs to qualify you based on your actual cash flow.
2. Your Debts (Debt-to-Income Ratio)
Your debt-to-income ratio (DTI) is one of the most important numbers in mortgage lending. It’s calculated by dividing your monthly debt payments by your gross monthly income.
DTI limits vary by loan type:
| Loan Type | Maximum DTI |
|---|---|
| Conventional | Up to 45-50% |
| FHA Loans | Up to 56.9% (with compensating factors) |
| VA Loans | No strict limit (41% guideline) |
What Counts as Debt
- Car payments
- Student loans
- Credit card minimum payments
- Personal loans
- Child support/alimony
- Other mortgages
What Doesn’t Count
- Utilities
- Cell phone bills
- Car insurance
- Subscriptions
3. Your Credit Score
Your credit score affects both your approval odds and your interest rate. Here’s a general breakdown:
| Credit Score | Loan Options | Rate Impact |
|---|---|---|
| 760+ | All options, best rates | Lowest rates available |
| 700-759 | All options | Slightly higher rates |
| 660-699 | Most options | Moderate rate increase |
| 620-659 | FHA, some conventional | Higher rates |
| 580-619 | FHA with 10% down | Limited options |
| Below 580 | Limited options | Case-by-case basis |
Pro Tip
Don’t know your score? You can check for free at AnnualCreditReport.com. Checking your own credit doesn’t hurt your score.
4. Your Down Payment
How much you put down affects your loan amount, monthly payment, and whether you’ll pay mortgage insurance:
| Down Payment | Benefits |
|---|---|
| 3% (Conventional) | Lowest entry point, PMI required |
| 3.5% (FHA) | Flexible credit requirements, MIP required |
| 0% (VA) | No down payment for eligible veterans |
| 10% | Lower PMI costs |
| 20% | No PMI required |
Texas First-Time Buyer Programs
If you’re a first-time buyer in Texas, you may qualify for down payment assistance through TSAHC, TDHCA, or local programs. Some offer up to 5% of the purchase price as a grant or forgivable loan.
A More Realistic Way to Calculate Affordability
While the 28/36 rule is a good starting point, I recommend a more personalized approach:
Step 1: Start with Your Actual Budget
Look at your last 3 months of bank statements. What do you actually spend each month? Not what you think you spend—what you really spend.
Step 2: Calculate Your Comfortable Housing Payment
Take your monthly income, subtract your actual expenses (not including current rent), and see what’s left. How much of that are you comfortable putting toward housing?
Remember to account for:
- Property taxes (Texas averages 1.8-2.5% of home value annually)
- Homeowners insurance
- HOA fees (if applicable)
- Maintenance (budget 1% of home value annually)
- Utilities (often higher than renting)
Step 3: Work Backward to Your Purchase Price
Once you know your comfortable monthly payment, use our mortgage calculator to work backward and determine your maximum purchase price based on current interest rates.
Example at 6.5% Interest Rate
| Monthly Payment | Approximate Home Price |
|---|---|
| $1,500 | $225,000 – $250,000 |
| $2,000 | $300,000 – $330,000 |
| $2,500 | $375,000 – $415,000 |
| $3,000 | $450,000 – $500,000 |
These are estimates including taxes and insurance. Your actual numbers will vary based on credit score, down payment, and property location.
Common Affordability Mistakes to Avoid
Mistake #1: Maxing Out Your Budget
Just because you qualify for a $400,000 home doesn’t mean you should buy one. Leave room in your budget for:
- Emergency savings
- Retirement contributions
- Kids’ activities or education
- Vacations and quality of life
- Unexpected home repairs
Mistake #2: Forgetting About Closing Costs
In Texas, closing costs typically run 2-5% of the purchase price. On a $350,000 home, that’s $7,000 to $17,500. Make sure you have funds for both your down payment AND closing costs.
Read more: Hidden Costs of Buying a Home
Mistake #3: Ignoring the True Cost of Homeownership
Your mortgage payment is just the beginning. Budget for:
- Property taxes (escrowed monthly but due annually)
- Homeowners insurance
- Maintenance and repairs
- Lawn care or HOA fees
- Higher utility bills
Mistake #4: Not Getting Pre-Approved First
In competitive Texas markets like Houston, Dallas, and Austin, sellers often won’t consider offers without pre-approval. Getting pre-approved also helps you understand exactly what you can afford before you fall in love with a house outside your budget.
How to Increase Your Home Buying Power
If your affordability calculation isn’t where you want it to be, here are proven strategies to improve it:
Short-Term (1-3 months)
- Pay down credit card balances (improves DTI and credit score)
- Avoid new debt or credit inquiries
- Document any additional income sources
Medium-Term (3-12 months)
- Pay off a car loan or personal loan
- Build your down payment savings
- Improve your credit score
Long-Term
- Increase your income (raises, side gigs, career moves)
- Pay down student loans
- Save for a larger down payment
Texas-Specific Considerations
Buying a home in Texas comes with some unique factors:
Property Taxes
Texas has some of the highest property taxes in the nation (averaging 1.8% but varying by county). A $350,000 home might have $6,000+ in annual property taxes. This significantly impacts your monthly payment.
No State Income Tax
The flip side is Texas has no state income tax, which can offset higher property taxes and increase your take-home pay.
Homestead Exemption
Once you purchase, apply for your homestead exemption. This can reduce your property tax bill by exempting a portion of your home’s value from taxation.
Hot Markets
In cities like Austin, Houston, Dallas, and San Antonio, competition can be fierce. Having your financing locked in gives you an edge.
Ready to Find Out What You Can Afford?
Get a personalized pre-approval with no obligation. I’ll show you exactly what you qualify for.
LET’S TALKYour Next Step: Get a Personalized Answer
Online calculators can give you a ballpark, but they can’t account for your complete financial picture—your specific debts, income sources, credit profile, and goals.
That’s where I come in. As a mortgage broker, I work with 40+ lenders to find the right loan for your situation. I can tell you exactly what you qualify for and help you understand all your options—without any obligation.
What You’ll Learn in a Free Consultation
- Your exact pre-approval amount
- Which loan programs you qualify for
- Your estimated monthly payment
- Down payment assistance options you may qualify for
- How to strengthen your application if needed
No pressure, no commitment. Just clear answers so you can move forward with confidence.
Want a real number instead of an estimate?
A calculator guesses. A pre-approval uses your verified income, debts and credit, and accounts for the actual tax rate where you are buying.
LET’S TALKFrequently asked questions
How much house can I afford on my salary?
There is no single multiplier that works, because two people earning the same income can afford very different homes depending on their debts, credit, down payment and the property tax rate where they are buying. Lenders work from your debt-to-income ratio rather than income alone, which is why the same salary produces different answers in different situations.
What debt-to-income ratio do Texas lenders require?
Conventional loans commonly allow up to about 45%, FHA is often more flexible with strong compensating factors, and VA uses a residual income test alongside DTI. These are general ranges rather than hard cutoffs, and a strong file can stretch them.
Why is the amount I am approved for higher than what I can comfortably pay?
Approval math looks at your reported debts, not your actual life. It does not know about childcare, tuition, travel, saving for retirement, or a car you plan to replace. The approval number is a ceiling, not a recommendation. Building your budget from your own spending and then working backward to a price is the more reliable approach.
How much do property taxes affect what I can afford in Texas?
Substantially. Texas has no state income tax and funds schools and local government heavily through property tax, so effective rates here run higher than in most states. Rates also vary by city and school district within the same county, so two homes at the same price can carry different monthly payments and therefore different approval amounts.
Does a bigger down payment mean I can afford more house?
It helps in two ways: it reduces the loan amount and it can remove or reduce mortgage insurance, which lowers the monthly payment. But it is a trade-off. Emptying your savings to put more down can leave you without reserves, and some loan programs want to see reserves. Bigger is not automatically better.
Should I include my spouse on the loan if their credit is weaker?
Not always. Adding a borrower adds their income, but most programs use the lower of the two middle credit scores, which can raise your rate. Sometimes one borrower on the loan with both on the title is the stronger structure. It is worth running both ways before deciding.
How do I account for HOA dues?
HOA dues count toward your housing payment for qualifying purposes, the same as taxes and insurance. A home with $250 a month in dues reduces the purchase price you can qualify for compared with an otherwise identical home without an HOA. Always ask for the dues figure before you fall for a house.
What if I am self-employed?
Lenders generally use your net income after business deductions, averaged over two years, not your gross revenue. That often produces a lower qualifying income than self-employed buyers expect. Bank statement programs are an option that looks at deposits instead of tax returns, though pricing differs.
How do I get a real number rather than an estimate?
Get pre-approved. A calculator works from assumptions; a pre-approval works from your verified income, debts and credit, and accounts for the actual tax rate on the homes you are considering. We start with a conversation and no upfront credit check.
Let’s Calculate Your Home Buying Power
Schedule a free consultation and get your personalized pre-approval. No pressure, no obligation—just clear answers.
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