The lender approves you for a $400,000 loan. Your monthly payment would be $2,800. You earn $6,000 per month gross income.
You’re approved. The question is: should you do it?
Lender approval and actual affordability are different things. This gap matters more at 50 and beyond. You’re not building toward peak earning years. You’re approaching or already in retirement. Fixed income doesn’t absorb financial mistakes.
Here’s how to borrow what you can actually afford, not just what the lender will approve.
The 36% Rule Explained
A conservative guideline says your total monthly debt obligations shouldn’t exceed 36% of your gross income before taxes.
Total debt obligations include:
- Mortgage payment (principal, interest, taxes, insurance)
- HOA fees
- Car payments
- Student loans
- Credit card minimum payments
- Child support or alimony
- Personal loans
- Any other recurring debt
Not just your mortgage. Everything.
Let’s say your household gross income is $5,000 per month. At 36%, your maximum total debt is $1,800.
If you have a $300 car payment, $200 in credit card minimums, and $100 in student loans, you’ve already committed $600. That leaves $1,200 for your mortgage payment including taxes, insurance, and HOA fees.
At $5,000 gross income and the 36% rule, a mortgage payment of $1,200 is your ceiling if you have $600 in other debt. Higher debt elsewhere means lower available housing payment.
Why 36% Instead of Higher Limits
Lenders will approve higher debt ratios. FHA allows up to 43% or even 50% in some cases with compensating factors. Conventional loans can go to 45%.
So why stick to 36%?
Quality of Life
At 43% debt-to-income on $5,000 gross income, you’re spending $2,150 on debt payments. Your take-home after taxes is probably around $3,750 to $4,000. After debt payments, you have $1,850 to $1,600 for everything else: food, utilities, gas, healthcare, clothing, savings, entertainment, emergencies.
That’s tight. Very tight.
Income Volatility
Younger buyers bet on income growth. At 50+, your income is more likely stable or declining than growing. Bonuses might stop. Overtime might end. Retirement might be voluntary or forced.
Conservative debt ratios protect you when income drops.
Healthcare Costs
Medicare doesn’t start until 65. If you retire or lose employer insurance before then, private insurance is expensive. Even with Medicare, you’ll face premiums, copays, deductibles, prescriptions, dental, vision, and hearing care. Low debt ratios leave room for these inevitable costs.
Retirement Reality
Social Security replaces only about 40% of pre-retirement income for average earners. Your mortgage payment in retirement will be a much larger percentage of income than during working years. Better to choose a manageable payment now than struggle later.
Unexpected Expenses
Life costs money. The AC breaks in Las Vegas summer heat. Your car needs major repairs. A grandchild needs help with college. Your parent needs financial assistance. Emergency funds only go so far. Low debt ratios give you flexibility.
The “Stretch” Trap
When people buy homes, they often “stretch” to make initial monthly payments. The theory: incomes will rise over time, making house payments easier to cover.
This theory worked great in your 30s. It’s dangerous at 50+.
Peak Earning Years Are Behind You
Most people hit peak earnings in their 50s. By 55, your salary likely won’t jump 20% like it might have at 35. Annual raises might barely cover inflation.
Approaching Fixed Income
If you’re 55 and planning to retire at 65, you have 10 years until income drops significantly. Stretching to afford a payment you can barely manage while working means struggling once retired.
Less Time to Course-Correct
Buy an unaffordable house at 35 and you have 30 years to increase income, refinance, or sell and downsize. Buy at 55 with the same problem and you have less flexibility. Selling costs money. Moving disrupts your life. Poor timing in a down market traps you.
Loss of Enjoyment
What’s the point of a beautiful home if you can’t afford to do anything but pay for it? House poor means skipping vacations, avoiding restaurants, delaying healthcare, and stressing over every expense. That’s not retirement.
Las Vegas Specific Considerations
Nevada’s cost of living affects affordability calculations.
No State Income Tax
Your take-home pay is higher here than in California or other high-tax states. More of your gross income is available for housing. This makes the 36% rule slightly more flexible in Nevada than elsewhere.
But don’t ignore it entirely. The advantage is maybe 5% to 7% more disposable income, not unlimited spending room.
Summer Utilities
Air conditioning in Las Vegas runs nearly year-round, and hard in summer. Budget $200 to $400 per month for electricity in peak summer, less in winter. This isn’t discretionary. You need AC to survive.
HOA Fees
Many Las Vegas communities have HOA fees ranging from $50 to $500 per month depending on amenities. These fees count toward your total housing cost. A $1,500 mortgage payment plus $300 HOA is really $1,800 in housing costs.
Property Taxes
Nevada property taxes are relatively low, around 0.6% to 0.8% of assessed value annually. On a $350,000 home, expect $2,100 to $2,800 per year, or $175 to $233 per month. Factor this into your debt ratio calculation.
Insurance
Homeowner’s insurance in Las Vegas runs $80 to $150 per month for typical coverage. Wind and hail coverage might cost more.
What Lenders Approve vs What You Should Borrow
Here’s a real scenario that happens constantly.
What You Tell the Lender
- Gross income: $7,000 per month
- Car payment: $400
- Credit cards: $150 minimum payments
- Student loan: $200
What the Lender Calculates
- Total existing debt: $750
- Maximum 43% debt ratio: $3,010
- Available for housing: $2,260
The lender approves a $2,260 mortgage payment (including taxes, insurance, HOA).
What You Should Actually Calculate
- Gross income: $7,000
- Estimated taxes (25%): $1,750
- Take-home: $5,250
- Existing debt: $750
- 36% total debt target: $2,520
- Already committed: $750
- Available for housing: $1,770
Your safe mortgage payment is $1,770, not the $2,260 the lender approved. That’s $490 per month difference, or $5,880 per year.
Taking the full approval amount leaves you with $5,250 take-home minus $3,010 in debt payments equals $2,240 for everything else. That’s food, utilities, gas, healthcare, savings, entertainment, and emergencies.
Staying at the 36% rule leaves you with $5,250 take-home minus $2,520 in debt payments equals $2,730 for everything else. That’s $490 more breathing room every month.
How to Calculate What You Can Actually Afford
Step 1: Calculate Take-Home Pay
Start with gross income. Subtract federal taxes, Social Security, Medicare, and state taxes (zero in Nevada, but account for it if moving from another state with retirement income). Your take-home is what actually hits your bank account.
Step 2: List All Current Debt
Write down every recurring debt payment. Don’t forget insurance, phone bills, subscriptions, or anything that auto-pays monthly.
Step 3: Apply the 36% Rule
Multiply gross income by 0.36. That’s your total debt ceiling. Subtract current debt. What’s left is available for housing.
Step 4: Include All Housing Costs
Your mortgage payment includes principal, interest, property taxes, homeowner’s insurance, and HOA fees. Don’t forget PMI if you’re putting down less than 20%. All of this comes from your available housing budget.
Step 5: Add a Buffer
The 36% rule is a ceiling, not a target. Aim for 30% to 32% if possible. This buffer absorbs rate changes if you’re getting an adjustable-rate mortgage, or gives you cushion for other expenses.
Special Considerations for Buyers 50+
Retirement Income Planning
Calculate your expected retirement income: Social Security, pensions, retirement account withdrawals. What percentage of your current income will this replace? If your retirement income is 60% of current income, can you afford your mortgage payment on 60% income?
Healthcare Costs Before Medicare
If you’re retiring before 65, private health insurance might cost $500 to $1,500 per month depending on coverage and health status. This comes out of your housing budget if it pushes total debt above 36%.
Longevity Risk
You might live 30+ years in retirement. Your mortgage payment today needs to be affordable in 2056, not just 2026. Inflation erodes purchasing power. Conservative borrowing protects your future self.
Supporting Adult Children or Aging Parents
Many people at this age provide financial help to adult children or aging parents. If you’re supporting others, that reduces income available for your own housing. Be honest about these obligations.
When You Can Exceed 36%
The 36% guideline has exceptions.
High Income with Low Expenses
If you earn $15,000 per month and have no debt except the mortgage, you might comfortably go to 40% or 43%. At that income level, even 43% debt-to-income leaves substantial discretionary income.
Temporary Debt Paying Off Soon
If you have a car payment ending in 6 months or a student loan ending in a year, you might accept higher debt-to-income temporarily knowing it will drop.
Substantial Reserves
If you have $200,000 in accessible savings beyond your down payment, higher debt-to-income carries less risk. Your reserves can cover shortfalls.
Pension Income Locked In
If you’re a retired government worker or union member with a guaranteed pension covering most expenses, you have less income volatility. Higher debt ratios are more tolerable.
Protecting Your Lifestyle
The point of conservative borrowing is maintaining quality of life.
You want to own a home you can afford without sacrificing everything else. You want to enjoy retirement, not spend it worrying about making the mortgage payment.
At 50+, you’ve worked decades to get here. Don’t sabotage your final working years and retirement by overextending on housing.
Choose the home that fits your budget comfortably. There’s always a bigger house, a better neighborhood, an extra bedroom. But there’s no substitute for financial peace of mind.
Work with Aaron Taylor “The Real Estate Guy” to find Las Vegas homes that fit your actual budget, not just what a lender will approve. He understands that approval amount and comfortable payment are different things, especially for buyers at this stage of life.
Your home should improve your life, not strain it.
Frequently Asked Questions
What percentage of income should go to mortgage for someone over 50?
Aim for total debt (including mortgage) at or below 36% of gross income. The mortgage itself should be 25-28% of gross income ideally. At 50+, lower ratios provide flexibility for healthcare costs, retirement planning, and income changes. Quality of life matters more than maximizing borrowing power.
Can I still buy a home if my debt-to-income ratio is above 36%?
Yes, lenders approve up to 43% or higher. But approval doesn’t mean wise. High debt ratios leave little cushion for unexpected expenses, healthcare costs, or income drops. Calculate whether you can maintain payments if income decreases 20-30% in retirement or if you face major unexpected expenses.
Should I pay off other debt before buying a home?
Often yes. Paying off a $400 car payment frees up $400 for housing costs under the 36% rule. For every $100 in monthly debt you eliminate, you increase affordable housing payment by approximately $100. High-interest debt like credit cards should definitely be paid before buying.
How do I calculate mortgage affordability on a fixed retirement income?
Use your actual retirement income (Social Security, pension, retirement withdrawals) not your current working income. Apply the 36% rule to retirement income. If retirement income is $4,000 monthly, maximum total debt is $1,440. Factor in that you won’t have commuting costs but will have higher healthcare costs.
What if lenders approve me for more than I’m comfortable paying?
Trust your instincts. Lender approval is maximum borrowing, not recommended borrowing. Shop for homes at your comfort level, not your approval level. Just because you can borrow $400,000 doesn’t mean you should. Financial stress undermines enjoyment of homeownership.
Do property taxes and insurance count in debt-to-income ratio?
Yes. Lenders calculate debt-to-income using your complete monthly payment: principal, interest, property taxes, homeowner’s insurance, HOA fees, and mortgage insurance if applicable. This is called PITI (principal, interest, taxes, insurance) or PITIA (adding association fees). All housing costs count toward the 36% limit.
How much house can I afford at $6,000 monthly income?
At 36% debt-to-income and no other debt, $2,160 for total housing payment. If you have $500 in other monthly debt, only $1,660 is available for housing. This includes principal, interest, taxes, insurance, and HOA. A mortgage calculator can show the home price this payment supports at current interest rates.
Should I include future retirement savings in affordability calculations?
Yes. If you’re not maxing out retirement contributions, factor in what you should be saving. At 50+, you need to save aggressively for retirement. If you should be saving $1,000 monthly but aren’t, that’s $1,000 less available for housing. Don’t sacrifice retirement security for a bigger house.
What if my spouse and I have different opinions on affordability?
Calculate using the conservative spouse’s comfort level. Financial stress damages relationships. One partner feeling stretched leads to resentment and anxiety. Better to buy less house and agree than buy more house and fight over money for 30 years.
Can I use bonuses or overtime in income calculations?
Lenders typically count bonuses and overtime if you’ve received them consistently for two years and they’re likely to continue. But for your personal affordability calculation, use only guaranteed income. Bonuses can disappear. Overtime can be reduced. Base your comfort level on income you’re certain to receive.
Key Takeaways
- Total debt obligations shouldn’t exceed 36% of gross income for comfortable homeownership at age 50+
- The 36% includes mortgage, car payments, credit cards, student loans, child support, and all recurring debt
- Lenders approve up to 43-50% debt-to-income, but approval doesn’t equal affordability or wisdom
- The “stretch” strategy of buying at maximum approval works poorly for buyers approaching retirement
- At 50+, income is more likely stable or declining than growing, requiring conservative debt ratios
- Las Vegas considerations include no state income tax (benefit), high summer utilities, HOA fees, and property taxes
- Calculate affordability using take-home pay after taxes, not gross income that includes taxes you’ll never see
- Quality of life matters more than maximizing home size at this stage of life
- On $5,000 gross monthly income with $600 other debt, safe mortgage payment is $1,200 maximum under 36% rule
- Work with Las Vegas agents who understand the difference between lender approval and actual affordability for buyers 50+
