How much home can you actually afford?

The honest answer

A lender will tell you "you qualify for $650,000." That's the number that fits their debt-to-income formulas. It's not the number that fits your life.

Here's the difference: a lender looks at your gross income, your existing debt payments, and your credit score. They decide how much they're willing to lend without too much risk to them. They do not factor in your kids' private school tuition, your travel, your gym membership, or the fact that Florida insurance just jumped 22% last year.

Affordability is a different calculation than qualification. This lesson is about the affordability number.

The 28/36 rule (and why it's conservative, not cautious)

The classic rule of thumb:

28% of gross monthly income → maximum housing payment (principal, interest, taxes, insurance, HOA)
36% of gross monthly income → maximum total debt (housing + car + student loans + credit cards)

Example: a household earning $250,000/year grosses roughly $20,800/month. 28% of that is ~$5,830 as a maximum monthly housing payment.

At 6.5% interest on a 30-year conventional loan with 20% down, that $5,830 supports a home price of roughly $850,000 to $900,000 — after you subtract Florida property taxes (~1.1% of assessed value), insurance ($4,000-$8,000/yr for a non-waterfront home), and a realistic HOA ($100-$500/mo depending on community).

If you're looking at Dr. Phillips or Windermere, that range doesn't buy what most first-time luxury buyers want. Which is why the next section matters more.

The Florida numbers most out-of-state buyers miss

If you're moving from Illinois, New York, or California, three line items will surprise you:

Property insurance. 2024-2026 has been brutal. A $900,000 Windermere home in a non-flood zone runs $5,500-$9,000/year. A waterfront property on the Butler Chain can exceed $15,000/year.
HOA + CDD. Lake Nona, Keene's Pointe, Reserve at Lake Butler Sound — many of the newer master-planned communities carry both an HOA ($150-$600/mo) and a Community Development District bond that shows up on your tax bill. Add $1,500-$4,000/year.
Hurricane deductibles. These are percentage-based (usually 2% of dwelling coverage), not flat. On a $1M insured home, a hurricane claim starts with a $20,000 deductible out of pocket.

Tally those and a household with $5,830/month in housing capacity quickly drops to $4,500 in actual mortgage-supporting capacity.

Reserve funds: the number your lender doesn't track

After closing, you should still have:

6 months of total monthly expenses in liquid reserves (housing + everything else)
1-2% of home value annually earmarked for maintenance
$10,000-$20,000 set aside for year-one furnishings and moves-in-scope projects

The mistake first-time buyers make is stretching to the top of their pre-approval, closing, and then discovering in month three that the pool pump needs replacing, the insurance renewal went up, and the water heater is shot. Good buyers leave a margin. Great buyers plan for it.

A working formula

Here's the worksheet we walk clients through:

Start with gross household income.
Subtract income tax at your effective rate (Florida has no state income tax — that helps).
Subtract retirement + college savings you'll still contribute to.
Subtract your current non-housing fixed costs (car, student loans, childcare, private school, etc.).
Divide what's left by 12.
Target 60-70% of that monthly leftover for total housing (PITI + HOA + maintenance reserve).

That's your real ceiling. For most of our clients, the "real ceiling" lands 15-25% below the lender's pre-approval.

The bottom line

Your lender will tell you what you can borrow. Your budget should tell you what you should borrow. Those are different numbers — and in Florida, with insurance and HOA math, the gap is bigger than in most states.

When you're ready, we'll walk through your specific numbers line-by-line. No sales pressure — just the math.

Up next: Pre-approval vs. pre-qualification — and why sellers ignore one of them entirely.