How much house can I afford?
Lenders don't approve a fixed multiple of your salary. They look at what share of your income the new payment would take, what other debts you carry, how much cash you bring and the interest rate you qualify for. Here's how that math works, with a price table by income and the adjustments that move the answer most.
The 28/36 rule
The classic guideline lenders start from is the 28/36 rule, based on your gross (pre-tax) monthly income:
- 28% front-end ratio: your total housing payment — principal, interest, property tax, homeowners insurance, plus PMI and HOA dues if you have them — should stay at or below 28% of gross monthly income.
- 36% back-end ratio: your housing payment plus every other monthly debt payment (car loans, student loans, credit card minimums, personal loans) should stay at or below 36%.
These are starting points, not legal limits. Automated underwriting systems can approve conventional loans with a total debt-to-income ratio (DTI) of 45% or even up to 50% for borrowers with strong credit and cash reserves, and FHA loans often allow ratios above their 31/43 guideline. But being approved for a payment and being comfortable with it are different things — the 28/36 rule is a good test of the second.
Example: a household earning $100,000 a year has a gross monthly income of $8,333. The 28% limit puts the maximum housing payment at about $2,333, and the 36% limit caps total debt payments at $3,000.
Home price you can afford by income
The table converts the 28% limit into a home price, assuming a 30-year fixed loan at 6.75%, a 20% down payment (so no PMI), property tax of 1.1% of the price per year and $1,500 a year for homeowners insurance — the same defaults our calculator uses.
| Gross income / year | Max housing payment (28%) | Home price | 20% down payment |
|---|---|---|---|
| $60,000 | $1,400 | ≈ $209,000 | ≈ $42,000 |
| $80,000 | $1,867 | ≈ $285,000 | ≈ $57,000 |
| $100,000 | $2,333 | ≈ $362,000 | ≈ $72,000 |
| $125,000 | $2,917 | ≈ $457,000 | ≈ $91,000 |
| $150,000 | $3,500 | ≈ $553,000 | ≈ $111,000 |
Property taxes and insurance vary a lot by location. In a state with 2% property taxes, or an area with expensive insurance, the same income buys noticeably less house — so plug in your local figures before trusting any rule of thumb.
How your other debts change the answer
The back-end ratio is where many buyers get caught. Take the same $100,000 household, whose total debt limit is $3,000 a month:
| Other monthly debts | Room left under 36% | Max housing payment | Home price |
|---|---|---|---|
| $0 | $3,000 | $2,333 (28% limit) | ≈ $362,000 |
| $600 | $2,400 | $2,333 (28% limit) | ≈ $362,000 |
| $900 | $2,100 | $2,100 (36% limit) | ≈ $323,000 |
With $900 a month in car and student loan payments, the household's price range drops by almost $40,000. Paying off a small loan before you apply — or not taking on a new car payment right before buying — can matter more than a raise.
How much the interest rate matters
Because the payment is fixed by your income, a higher rate means a smaller loan. For the $100,000 household with 20% down:
- At 5.75%: about $395,000
- At 6.75%: about $362,000
- At 7.75%: about $332,000
Each percentage point moves the affordable price by roughly 8–9%. That's why improving your credit score before applying, comparing several lenders and understanding the APR and points on each offer is worth real money.
Down payment and PMI
You don't need 20% down. Conventional loans are available with as little as 3% down for qualifying buyers, FHA loans with 3.5% down, and VA and USDA loans with no down payment for eligible borrowers. The trade-off: with less than 20% down on a conventional loan you'll pay private mortgage insurance (PMI), which counts toward your 28%.
For the $100,000 household, putting 10% down instead of 20% and paying PMI at 0.55% a year lowers the affordable price to roughly $308,000 — but the cash needed up front drops from about $72,000 to about $31,000. For many buyers, that's the trade that makes buying possible at all.
Don't forget closing costs, typically 2% to 5% of the loan amount, and a cash cushion afterward. Our guide to closing costs breaks them down line by line.
Work out your number, step by step
- Find your gross monthly income: annual salary divided by 12 (add a co-borrower's income if buying together).
- Multiply by 0.28 to get your maximum housing payment.
- Multiply by 0.36 and subtract your other monthly debts. If this is lower than step 2, it's your real limit.
- Enter candidate home prices in the calculator — including taxes, insurance, PMI and HOA — until the total monthly payment matches your limit.
- Check your cash: down payment plus closing costs plus an emergency fund that survives the purchase.
Afford vs. comfortable
The maximum a lender approves is a ceiling, not a target. Before you stretch, think about:
- Maintenance: a common budgeting rule is to set aside 1%–2% of the home's value each year for repairs.
- Rising escrow costs: property taxes and insurance premiums tend to go up over time, and your payment rises with them (see how escrow works).
- Your other goals: retirement contributions, childcare and savings all come out of the same take-home pay. The 28% ratio is based on gross income, so the share of your net pay is higher.
Try your own numbers. See your full monthly payment with taxes, insurance, PMI and HOA included.
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