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.
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.
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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