When I bought my first home, the bank pre-approved me for $520,000. My actual budget? About $340,000. The gap was everything.
Banks calculate what you can pay, not what you should pay. Their model assumes you'll cut everything else to make the mortgage work. Reality doesn't work that way.
The 28/36 rule (and why it's just a starting point)
Conventional advice says spend no more than 28% of your gross income on housing. But gross income is misleading — you spend take-home pay. Someone earning $100,000 gross might take home $72,000. That 28% rule says $2,333/month — nearly 39% of actual take-home. Different picture.
A better way
Start with your monthly take-home pay. Subtract all non-housing debt, expected utilities, home maintenance (1% of home value/year), savings goals, and a buffer. What's left is your realistic housing budget.
Our mortgage calculator shows the full picture — monthly payment, total interest, and amortization schedule.