How Much House Can I Afford? A Complete Guide to Home Affordability
Use the 28/36 rule to find your comfortable price range—and learn why buying below your maximum is the smarter financial move.
Last updated: · 12 min read
Quick Answer
The 28/36 rule is the standard guideline for home affordability: spend no more than 28% of your gross monthly income on housing costs and no more than 36% on all debt combined.
For example, if you earn $100,000 per year ($8,333/month), your maximum housing payment should be around $2,333/month. At current mortgage rates (6.16% as of January 2026), this typically translates to a home price of $350,000-$400,000 with 20% down.
But here's what matters most: what you qualify for isn't always what you should spend.
See Your Personal Numbers →The 28/36 Rule: Your Affordability Framework
The 28/36 rule gives you two key numbers to work with:
The "28": Your Housing Limit
Your total monthly housing costs should not exceed 28% of your gross monthly income (your income before taxes).
Housing costs include:
- Principal (the loan amount you're paying down)
- Interest (the cost of borrowing)
- Taxes (property taxes, typically 0.5%-2.5% of home value annually)
- Insurance (homeowner's insurance)
- PMI (private mortgage insurance, if your down payment is less than 20%)
- HOA fees (if applicable)
This combination is often called "PITI" (Principal, Interest, Taxes, Insurance), and represents your true monthly housing cost—not just your mortgage payment.
The "36": Your Total Debt Limit
Your total monthly debt payments—including housing—should not exceed 36% of your gross monthly income.
Total debt includes your housing payment plus:
- Car payments
- Student loans
- Credit card minimum payments
- Personal loans
- Child support or alimony
This is your "debt-to-income ratio" (DTI), and it's one of the most important numbers lenders use to evaluate your application.
Quick Math Example
| Income | Monthly Gross | Max Housing (28%) | Max Total Debt (36%) |
|---|---|---|---|
| $75,000/year | $6,250 | $1,750 | $2,250 |
| $100,000/year | $8,333 | $2,333 | $3,000 |
| $150,000/year | $12,500 | $3,500 | $4,500 |
How to Calculate What House You Can Afford
Step 1: Calculate Your Maximum Monthly Housing Payment
Start with your gross annual income (before taxes) and divide by 12 to get your monthly income. Then multiply by 0.28.
(Annual Income ÷ 12) × 0.28 = Maximum Monthly Housing Payment
Example: $100,000 income
- $100,000 ÷ 12 = $8,333/month
- $8,333 × 0.28 = $2,333 maximum housing payment
Step 2: Subtract Your Existing Monthly Debts
If you have other debts, they reduce how much you can spend on housing.
(Monthly Income × 0.36) - Existing Debt Payments = Available for Housing
Example: $100,000 income with $500/month in debt payments
- $8,333 × 0.36 = $3,000 (max total debt)
- $3,000 - $500 = $2,500 available for housing
Step 3: Convert Your Payment Budget to a Home Price
Once you know your comfortable monthly payment, you can estimate the home price you can afford. This depends on:
- Interest rate (currently around 6.16% for a 30-year fixed mortgage)
- Down payment (20% avoids PMI; less requires PMI)
- Loan term (30-year vs. 15-year)
- Property taxes and insurance (varies by location)
General rule of thumb: At current rates, you can typically afford a home priced at about 3-4 times your annual income with a 20% down payment.
Skip the Math — Calculate Your Price →Home Affordability by Income Level (2026)
Here's what you can typically afford at different income levels, assuming a 20% down payment, 6.16% interest rate, and average property taxes and insurance.
| Annual Income | Max Monthly Payment (28%) | Estimated Home Price Range |
|---|---|---|
| $50,000 | $1,167 | $150,000-$180,000 |
| $60,000 | $1,400 | $185,000-$220,000 |
| $75,000 | $1,750 | $240,000-$280,000 |
| $100,000 | $2,333 | $325,000-$375,000 |
| $125,000 | $2,917 | $400,000-$460,000 |
| $150,000 | $3,500 | $500,000-$560,000 |
| $200,000 | $4,667 | $675,000-$750,000 |
These are estimates. Your actual affordability depends on your specific down payment, local property taxes, insurance costs, and existing debts.
How Existing Debt Changes the Picture
Debt significantly impacts how much house you can afford. Here's how debt payments affect someone earning $100,000:
| Scenario | Max Housing Payment | Estimated Home Price |
|---|---|---|
| No other debt | $2,333 | $350,000-$375,000 |
| $400/month car payment | $2,333 (limited by 28% rule) | $350,000-$375,000 |
| $400 car + $300 student loans | $2,300 | $325,000-$350,000 |
| $400 car + $600 student loans | $2,000 | $275,000-$310,000 |
The more debt you carry, the less home you can afford—even if you earn a high income.
What Lenders Look At: Beyond the 28/36 Rule
While the 28/36 rule is a helpful guideline, lenders consider several other factors when determining how much they'll lend you.
Debt-to-Income Ratio (DTI)
Lenders focus heavily on your DTI ratio. While 36% is the traditional guideline:
- Conventional loans: Many lenders approve DTIs up to 43%-45%
- FHA loans: May allow up to 50% DTI with compensating factors
- VA loans: Often more flexible on DTI
Just because a lender will approve you for a higher DTI doesn't mean you should take it. More on this critical distinction below.
Credit Score
Your credit score affects both approval and your interest rate:
| Credit Score | Typical Rate Impact | Monthly Payment Difference* |
|---|---|---|
| 760+ (Excellent) | Best rates available | Baseline |
| 700-759 (Good) | +0.25%-0.5% | +$45-$90/month |
| 660-699 (Fair) | +0.5%-1.0% | +$90-$180/month |
| 620-659 (Poor) | +1.0%-1.5% | +$180-$270/month |
*Based on $300,000 loan amount
A higher interest rate doesn't just cost you monthly—it adds up to tens of thousands over the life of the loan.
Other Factors Lenders Consider
- Employment history: Generally prefer 2+ years at the same job or in the same field
- Down payment: Larger down payments reduce lender risk
- Cash reserves: Having 2-6 months of payments saved shows stability
- Property type: Condos and investment properties may have stricter requirements
The Critical Question: What You Qualify For vs. What You Should Spend
Here's where financial literacy matters most: the amount a lender approves you for is often more than you should actually spend.
This is one of the most important concepts in home buying, and getting it wrong can affect your finances for decades.
Why Lenders Approve More Than You Should Borrow
Lenders care about one thing: whether you'll repay the loan. They don't factor in:
- Your retirement savings goals
- Your desire to take vacations or enjoy life
- Future expenses like children or career changes
- Whether you want money left over each month
- Your emergency fund needs
- Home maintenance and repairs
A lender might approve you for a $450,000 home, but that doesn't mean buying at that level is wise for your overall financial health.
The "House Poor" Trap
Being "house poor" means your mortgage consumes so much of your income that you struggle to afford anything else. Warning signs include:
- Living paycheck to paycheck despite earning a good income
- Unable to contribute to retirement accounts
- No emergency fund or constantly depleting it
- Feeling stressed about money regularly
- Deferring home maintenance because you can't afford repairs
- Missing out on experiences because housing costs dominate your budget
The house poor trap is especially dangerous because it's hard to escape—you can't easily reduce your mortgage payment once you've committed.
A Smarter Approach: The 25% Rule
Many financial experts recommend a more conservative approach: keep housing costs at 25% of your take-home pay (not gross income).
This gives you breathing room for:
- Retirement contributions (aim for 15% of income)
- Emergency fund building (3-6 months of expenses)
- Other financial goals (children's education, vacations, early retirement)
- Life's surprises (job loss, medical expenses, home repairs)
| Approach | Monthly Housing | What's Left for Everything Else |
|---|---|---|
| Max lender approval (45% DTI) | $3,750 | Very little after taxes and basic expenses |
| 28/36 rule (28%) | $2,333 | ~$500-$800/month for savings |
| Conservative (25% take-home) | $1,875* | ~$1,000-$1,200/month for savings |
*Assumes ~$7,500/month take-home pay on $100,000 income
The conservative approach might mean a smaller house, but it means financial freedom in other areas of your life. You'll actually be able to enjoy your home instead of just paying for it.
Down Payment: How Much Do You Really Need?
Your down payment significantly affects both your monthly payment and the home price you can afford.
20% Down: The Traditional Standard
Putting 20% down has key advantages:
- No PMI required (saves $100-$300/month on typical loans)
- Lower monthly payments (smaller loan amount)
- Better interest rates (lower risk to lender)
- Instant equity (you own 20% of your home from day one)
Example on a $400,000 home:
- 20% down = $80,000 down, $320,000 loan
- Monthly P&I: ~$1,955
- No PMI
Lower Down Payment Options
You don't need 20% down to buy a home. Here are common alternatives:
| Loan Type | Min Down Payment | PMI Required? | Best For |
|---|---|---|---|
| Conventional | 3% | Yes, until 20% equity | Good credit, want flexibility |
| FHA | 3.5% | Yes, for loan life (MIP) | Lower credit scores |
| VA | 0% | No | Veterans and active military |
| USDA | 0% | Yes (guarantee fee) | Rural areas, income limits apply |
Should You Wait to Save 20%?
It depends on your market and situation.
Arguments for waiting:
- Avoid PMI costs entirely
- Lower monthly payments
- More equity from the start
- Stronger offer in competitive markets
Arguments for buying sooner:
- Home prices may rise while you save
- You start building equity sooner
- Rent payments build no wealth
- Forced savings through mortgage payments
Current Market Context: January 2026
Understanding today's market helps you make informed decisions.
Mortgage Rates
As of January 2026:
- 30-year fixed: 6.16% (Freddie Mac)
- 15-year fixed: 5.46%
Rates are at a 15-month low and expected to hover around 6% through 2026. A year ago, rates averaged 6.93%, so today's buyers have slightly more purchasing power.
| Rate | Monthly P&I | Total Interest (30 years) |
|---|---|---|
| 6.16% (current) | $1,709 | $335,240 |
| 6.93% (January 2025) | $1,848 | $385,280 |
| 5.50% (possible) | $1,590 | $292,400 |
Based on $350,000 home with 20% down ($280,000 loan)
A 1% rate difference means about $140/month or $50,000 over the life of the loan.
Home Prices
- Median existing home price: $409,200 (NAR, November 2025)
- 2026 forecast: Prices expected to rise 2%-4% ($419,000-$427,000)
Home prices remain elevated but aren't expected to drop significantly. Most experts don't predict a major correction.
Frequently Asked Questions
How much house can I afford on a $75,000 salary?
On a $75,000 annual salary, the 28/36 rule suggests a maximum monthly housing payment of $1,750 (28% of $6,250 monthly income). At current mortgage rates with 20% down, this typically translates to a home price of approximately $240,000-$280,000, depending on your local property taxes and insurance costs. If you have significant other debts, your affordable price may be lower.
What is the 28/36 rule for mortgages?
The 28/36 rule is a guideline stating that you should spend no more than 28% of your gross monthly income on housing costs (mortgage, taxes, insurance, PMI, HOA) and no more than 36% on all debt payments combined (housing plus car loans, student loans, credit cards, etc.). For example, with a $100,000 income ($8,333/month), your maximum housing payment would be $2,333 and maximum total debt payments would be $3,000.
How much house can I afford with $10,000 down?
It depends on the home price. A $10,000 down payment represents:
- 5% down on a $200,000 home
- 3.3% down on a $300,000 home
- 2.5% down on a $400,000 home
With a small down payment, you'll need PMI (adding $100-$300/month) and will have a larger loan amount, meaning higher monthly payments. Make sure your monthly payment—including PMI—stays within the 28% guideline based on your income.
Should I buy a house at my maximum budget?
Generally, no. Buying at your maximum lender-approved amount often leads to being "house poor"—where housing costs consume so much income that you can't save, invest, or enjoy life. A wiser approach is to buy below your maximum, ideally keeping housing costs at 25% of your take-home pay. This leaves room for retirement savings, emergency funds, and financial flexibility. Your future self will thank you.
How do student loans affect how much house I can afford?
Student loans reduce your home buying power because they count toward your 36% debt-to-income ratio. For example, if you earn $100,000/year and have $500/month in student loan payments, that $500 comes out of your total $3,000 debt allowance (36% of $8,333). You'd likely be limited to around $2,000-$2,200 for housing to stay comfortably within guidelines, rather than the full $2,333 (28% limit).
Next Steps: From Budget to Home
Now that you understand home affordability, here's how to move forward:
1. Calculate Your Personal Numbers
Use our Mortgage Calculator to see exactly what you can afford based on your specific income, debts, and down payment. Don't rely on rough estimates—get your real numbers.
2. Get Pre-Approved
A mortgage pre-approval tells you exactly what lenders will offer and shows sellers you're a serious buyer. It doesn't commit you to anything but gives you a concrete budget to work with.
3. Shop Below Your Maximum
Just because you're approved for a certain amount doesn't mean you should spend it all. Leave yourself room for savings, emergencies, and enjoying life beyond your home.
4. Consider Total Cost of Ownership
Beyond the mortgage, budget for:
- Maintenance (typically 1% of home value per year)
- Utilities (often higher than apartments/rentals)
- Furnishing and moving costs
- Potential HOA fees
Ready to Calculate Your Affordable Home Price?
Use our free Mortgage Calculator to see your exact numbers based on your income, debts, and down payment.
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Disclaimer: This content is for educational and informational purposes only and does not constitute financial, tax, or legal advice. Individual circumstances vary, and you should consult with a qualified mortgage professional before making home buying decisions. While we strive for accuracy, interest rates, home prices, and lending guidelines change frequently. Data current as of January 2026.