How Much House Can I Afford?" A Simple Guide to Calculating Your Real Budget

Hello, Hudson Valley! Levan Tsiklauri here—you can call me LT. As the author of the "Navigating Realty with LT" blog, the question I hear more than any other is, “How much house can I really afford?” It’s the big, scary question that kicks off every home-buying journey.

You’ve probably already played with an online home affordability calculator ny. You type in your salary, click a button, and a big, exciting number pops up. It’s a fun starting point, but let’s be honest: those calculators are often designed to show you the absolute maximum a bank might lend you, not what you can comfortably and safely afford. They don't know about our Hudson Valley property taxes, and they certainly don't care if you have enough money left over to enjoy life after you get the keys.

My goal is different. I believe in empowering you with knowledge so you can build a secure financial future, not just buy a house. So, today, we're going to pull back the curtain. I’m going to teach you the simple, lender-approved math to calculate a real, sustainable budget. By the end of this article, you won't need a calculator—you'll understand the numbers yourself and have a realistic, safe budget for your Hudson Valley home search.

The Lenders' Golden Rule: A Simple Guideline Called the 28/36 Rule

Before a lender decides how much to loan you, they need to assess their risk. To do this, they use a time-tested guideline called the 28/36 Rule. It's not a law, but it's the standard starting point for most conventional mortgages, and understanding it is the key to unlocking your true budget.  

Here’s what it means in simple terms:

·         The 28% Rule (Front-End Ratio): Your total monthly housing payment should be no more than 28% of your pre-tax income.

·         The 36% Rule (Back-End Ratio / DTI): Your total monthly debt payments (including your new housing payment) should be no more than 36% of your pre-tax income.

Your housing payment is often referred to by the acronym PITI: Principal, Interest, Taxes, and Insurance. This is the total amount you'll pay each month for your home. Your total debt, also known as your Debt-to-Income (DTI) ratio, includes that future PITI payment plus any other recurring debts like car loans, student loans, and the minimum monthly payments on your credit cards. Lenders focus on this because it helps them evaluate your "ability to repay" the loan.  

Step 1: Find Your Maximum Monthly Housing Payment

Let's walk through this with a realistic example. We'll create a hypothetical first-time home buyer in the Hudson Valley to see how a lender would calculate their maximum monthly payment.

A) Start with Your Gross Monthly Income

First, lenders look at your Gross Monthly Income, which is your total earnings before any taxes, 401(k) contributions, or health insurance premiums are deducted. They use this number because it's a stable, standardized way to measure your earning power.  

·         Case Study Example: Let's say you have an annual salary of $120,000.

·         Calculation: $120,000 / 12 months = $10,000 in Gross Monthly Income.

B) Apply the 28% Rule (The Front-End Limit)

Next, we apply the first part of the rule to find the maximum amount that can go toward your housing payment alone.

·         Calculation: $10,000 (Gross Monthly Income) x 0.28 = $2,800.

·         The Verdict: According to this rule, your maximum PITI (Principal, Interest, Taxes, and Insurance) payment should not exceed $2,800 per month.

C) Apply the 36% Rule (The Back-End Limit)

Now, we calculate the absolute ceiling for all of your debts combined, including your future mortgage.

·         Calculation: $10,000 (Gross Monthly Income) x 0.36 = $3,600.

·         The Verdict: This means your total monthly debt payments cannot exceed $3,600.

D) Subtract Other Debts to Find Your Real Housing Limit

This is the most critical part of the DTI calculation. We take the total debt limit from the 36% rule and subtract your existing non-housing debts to see what's left for the mortgage.

·         Case Study Debts: Let's assume you have a $500 monthly car payment and a $300 monthly student loan payment, for a total of $800 in existing debt.

·         Calculation: $3,600 (Total Debt Limit) - $800 (Existing Debts) = $2,800.

·         The Verdict: After accounting for your other debts, the maximum PITI payment you can afford under the back-end rule is $2,800 per month.

A lender will always use the lower of the two results as your maximum approvable housing payment. In our example, both the front-end and back-end calculations resulted in $2,800, so that is the firm ceiling for our monthly PITI.

Step 2: From Monthly Payment to Home Price (The Hudson Valley Reality)

Now that we have a maximum monthly payment of $2,800, how do we turn that into a home price? This is the most important step, and it's where local expertise becomes essential.

Why Online Calculators Fail in New York

This is where generic online calculators will lead you astray. They use national averages for property taxes, but here in the Hudson Valley, our taxes are among the highest in the country. Effective property tax rates in counties like Orange (2.46%), Ulster (2.12%), and Dutchess (2.05%) are often more than double the national average. This single factor can shrink your real budget by $100,000 or more compared to what a generic calculator tells you.

The Calculation: Working Backward from PITI

Let's break down our $2,800 maximum PITI payment with realistic Hudson Valley numbers.

1.      Start with Your Max PITI: $2,800

2.      Subtract Estimated Monthly Property Taxes: -$1,000. This is based on a conservative annual tax bill of $12,000, a very real number for a mid-range home in our area.  

3.      Subtract Estimated Monthly Home Insurance: -$125. This is based on an annual premium of $1,500, a typical cost for a home of this value in New York.  

4.      Your Max Principal & Interest (P&I) is: $2,800 - $1,000 - $125 = $1,675 per month.

This $1,675 is the actual amount left over to pay back the loan itself (the principal) and the interest to the bank.

The Final Step: Finding Your Price Range

The P&I payment is what determines your total loan amount. The exact number depends on the interest rate at the time you buy.

·         The Math: As of September 2025, with a 7% interest rate on a 30-year fixed mortgage, a $1,675 monthly P&I payment supports a loan of roughly $250,000.  

Now, we simply add your down payment to find your final budget. If you've saved $65,000 for a down payment:

·         Final Budget: $250,000 (Loan Amount) + $65,000 (Down Payment) = $315,000 Maximum Home Price.

Here is a table that breaks down the entire process:

Don't Max Out! Budgeting for the True Cost of Homeownership

I need you to hear this: the $315,000 we just calculated is a ceiling, not a target. The smartest, happiest homeowners I know all bought a home for less than their maximum approval amount. Why? Because the lender's calculation for "affordability" is not the same as the true "cost of living" in that home.

The Costs Your Lender Ignores

The bank’s DTI calculation stops at PITI and known debts, but your financial responsibilities as a homeowner are just beginning. Here are the major expenses their math doesn't include:  

·         Routine Maintenance (The 1% Rule): A wise rule of thumb is to budget 1% of your home's purchase price every year for routine maintenance—things like cleaning the gutters, servicing the HVAC, and repainting a room. For our  

$315,000 home, that’s $3,150 per year, or an extra $262 per month that you need to set aside.

·         Major Repairs: Eventually, big-ticket items will need replacing. A new roof can cost over $9,000, and a new HVAC system can run from $5,000 to $12,000. These aren't monthly costs, but you must have a separate savings fund ready for when they inevitably occur.  

·         Utilities: If you're moving from an apartment, be prepared for a jump in your utility bills. Gas, electric, water, and sewer costs are almost always higher in a single-family home and are not factored into your DTI ratio.  

·         Furnishings & Upgrades: From a lawnmower to a new sofa, there are always initial costs to make a new house feel like home.  

Pushing your budget to the absolute maximum leaves no room for these realities. A buyer who is approved at a 36% DTI has 64% of their gross income left for taxes, savings, and all of life's other expenses. When you factor in the true costs of homeownership, that cushion shrinks fast, which is how people become "house poor." The best strategy is to calculate your maximum budget and then intentionally shop for homes 10-15% below that number to give yourself a vital financial buffer.

Your Home Affordability Blueprint

Let's put it all together in an actionable checklist. Use these five steps to calculate your own realistic home-buying budget.

1.      Calculate Your Gross Monthly Income: Take your total annual salary and divide it by 12.

2.      List All Your Monthly Debt Payments: Write down your car payments, student loans, and the minimum required payments on any credit cards.

3.      Apply the 28/36 Rule: Calculate your maximum PITI. It will be the lower of these two numbers: (Your Gross Monthly Income x 0.28) or ((Your Gross Monthly Income x 0.36) - Your Total Debts).

4.      Work Backward to a Home Price: Take your max PITI and subtract realistic monthly estimates for Hudson Valley property taxes (a safe starting point is $1,000) and home insurance (around $125). This gives you your max Principal & Interest (P&I). Use a mortgage calculator to see what loan amount that P&I supports at current interest rates, then add your down payment.

5.      Confirm Your Numbers: This is the most important step. Your calculation is a powerful estimate, but you need to talk to a trusted local lender to make it official.

The Final Step: Make It Official

You started this article with a daunting question, and now you have a powerful, transparent framework. You understand how lenders think, you know how to account for our unique Hudson Valley costs, and you have a safe, realistic budget in hand. This manual calculation is far more reliable and empowering than any generic online tool. It’s an estimate, but it’s a smart estimate.

Now that you have a realistic budget in mind, the next step is to make it official. The only way to confidently start visiting homes and making offers is with a pre-approval letter from a lender.

I work with the best local lenders in the Hudson Valley who understand our market and can help you get a rock-solid pre-approval. Click below to schedule a Free, no-obligation Buyer Consultation, and I'll help you take the first step on your home-buying journey.

Levan Tsiklauri (LT) | Realtor®| [ Book a Consultation▸]

(917) 905-7923 | Levan@realtylt.com | www.realtylt.com

RealtyLT | United Real Estate | 1097 Route 55, Suite 9, Lagrangeville, NY 12540