How Much House Can I Afford? (Complete Guide)

Buying a home is the largest financial decision most people will ever make. Get it right, and you build wealth for decades. Get it wrong, and you end up “house poor” — drowning in payments while your retirement accounts sit empty.

The question every buyer asks is: “How much house can I actually afford?” Not how much the bank says you can borrow — banks are happy to lend you more than is healthy — but what fits your life and your budget.

This guide gives you the exact formula, walks through three real-world salary examples, and shows you how to run the numbers yourself.

The 28/36 Rule: The Gold Standard

Lenders and financial advisors use a simple guideline called the 28/36 rule. It’s been around for decades because it works.

Front-end ratio (28%)

Your total monthly housing payment should be no more than 28% of your gross (pre-tax) monthly income. “Housing payment” means all four of these combined — often abbreviated PITI:

Principal & interest (your mortgage payment)
Income property taxes
Total homeowners insurance
I (again) — HOA dues and private mortgage insurance (PMI), if applicable

Back-end ratio (36%)

Your total monthly debt payments — including your housing payment plus credit cards, car loans, student loans, and any other debt — should be no more than 36% of your gross monthly income.

Why these numbers?

Banks learned the hard way that when these ratios get too high, borrowers default. The 28/36 rule isn’t arbitrary — it represents the threshold where most people start to struggle.

⚠️ Important: These are maximums, not goals. Many financial planners recommend targeting 25% or lower for housing to leave room for retirement savings, emergencies, and life.

Step-by-Step: How to Calculate It

Let’s walk through the math for three common salaries. We’ll assume:

20% down payment (avoids PMI)
6.5% interest rate (a reasonable 2026 assumption for a 30-year fixed mortgage)
1.1% property tax (U.S. average)
$1,400/year homeowners insurance (national average)
No HOA, no other debt (for simplicity)

Example 1: $60,000 salary

Gross monthly income: $60,000 ÷ 12 = $5,000
Max housing payment (28%): $5,000 × 0.28 = $1,400/month

After subtracting estimated property tax (~~$150/month for a $165k home) and insurance (~~$117/month), that leaves about $1,133/month for principal and interest.

At 6.5% over 30 years, $1,133/month supports roughly a $142,000 mortgage. Add your 20% down payment and you can afford a home priced around $178,000.

Example 2: $80,000 salary

Gross monthly income: $6,667
Max housing payment (28%): $1,867/month

After taxes and insurance on a $240k home (~$220 + $117), you have about $1,530/month for P&I.

At 6.5% × 30 years, that supports a $192,000 mortgage, meaning a home priced around $240,000 with 20% down.

Example 3: $120,000 salary

Gross monthly income: $10,000
Max housing payment (28%): $2,800/month

After taxes and insurance on a $380k home (~$348 + $117), about $2,335/month is left for P&I.

At 6.5% × 30 years, that’s a $293,000 mortgage — supporting a home priced around $366,000 with 20% down.

Salary	Max home price	Monthly payment
$60,000	~$178,000	~$1,400
$80,000	~$240,000	~$1,867
$120,000	~$366,000	~$2,800

All figures assume 20% down, 6.5% rate, 30-year fixed, average taxes and insurance.

Factors That Change Everything

The 28/36 rule is a starting point, but several factors can push your real budget up or down by tens of thousands of dollars.

Down payment size

Putting down 20% isn’t just tradition — it lets you avoid private mortgage insurance (PMI), which typically costs 0.5%–1% of the loan annually. On a $300,000 mortgage, that’s $1,500–$3,000 per year of pure waste.

But 20% isn’t required. FHA loans allow as little as 3.5% down, and some conventional loans allow 3%. The catch? You’ll pay PMI and borrow more, which means a higher monthly payment and a smaller home for the same salary.

Interest rates

Mortgage rates swing dramatically. The same $300,000 mortgage costs:

$1,432/month at 3.5%
$1,896/month at 6.5%
$2,162/month at 8.5%

That’s a $730/month swing — equivalent to over $260,000 in lifetime interest. Shop multiple lenders, and consider paying “points” upfront if you plan to stay long-term.

Your existing debt

The back-end ratio (36%) is where many buyers get tripped up. If you have:

$400/month car payment
$300/month student loan
$200/month credit card minimums

That’s $900/month in debt. On an $80,000 salary ($6,667/month gross), your remaining housing budget drops from $2,400 to $1,500/month — a $160,000 swing in home price.

Pro tip: Pay down consumer debt before buying a house. It improves both your DTI ratio and your credit score, qualifying you for a better rate.

Property taxes and insurance

These vary wildly by location:

Property tax: ranges from 0.28% (Hawaii) to 2.49% (New Jersey)
Insurance: $1,000/year in low-risk areas, $3,000+ in hurricane/flood zones

A $400,000 home in New Jersey (2.49% tax) costs $9,960/year in property tax alone. The same home in Colorado (0.51% tax) costs just $2,040/year — a difference of $660/month.

HOA fees and special assessments

If you’re buying a condo or in a planned community, HOA dues can be $200–$800/month. Lenders include these in your housing payment for ratio calculations — so a $400 HOA reduces your borrowing power by roughly $60,000.

Red Flags: When “Affordable” Isn’t

The bank will often approve you for more than the 28/36 rule allows — sometimes significantly more. Don’t assume approval equals affordability.

Signs you’re shopping above your real budget:

Your housing payment exceeds 30% of take-home pay (not gross)
You can’t max out retirement accounts (401k, IRA) after the mortgage
You have no emergency fund beyond closing costs
You’d be unable to cover a $10,000 repair (roof, HVAC) without going into debt

A good rule of thumb: aim for a home priced at 2.5×–3× your gross annual income, not the 4×–5× banks often allow.

Run Your Own Numbers

The fastest way to know your real budget is to work backwards from a monthly payment you’re comfortable with. Use our free mortgage calculator below — enter the home price you’re considering, your down payment, and today’s rate, and see instantly:

Your exact monthly payment (P&I)
Total interest over the life of the loan
A full amortization schedule

Try different scenarios — what if you put down 15% instead of 20%? What if rates drop to 5.5%? The numbers tell the truth that real estate agents and bankers won’t.

Frequently Asked Questions

Can I afford a house making $50,000 a year?

On $50,000/year ($4,167/month gross), the 28% rule caps your housing payment at $1,167/month. With 20% down and a 6.5% rate, that supports a mortgage of about $118,000, meaning a home priced around $148,000. In most U.S. metros, this means looking at condos, townhomes, or moving to a lower-cost region.

How much income do I need for a $300,000 house?

To stay within the 28% rule on a $300,000 home with 20% down (so a $240,000 mortgage at 6.5%), your monthly P&I is about $1,518. Add property tax (~~$275) and insurance (~~$117), and your total housing payment is roughly $1,910/month. You’d need a gross income of $6,820/month, or about $82,000/year.

Is the 28/36 rule outdated?

The ratios are still sound, but today’s reality makes them harder to hit. With home prices rising faster than wages, many first-time buyers exceed 28%. If you must stretch, prioritize keeping the back-end ratio (total debt) under 36% — that one matters most for long-term financial health.

What credit score do I need to buy a house?

Conventional loan: 620 minimum (740+ for the best rates)
FHA loan: 580 minimum (3.5% down) or 500 (10% down)
VA loan: typically 580–620 (no down payment required for eligible veterans)
USDA loan: 640 (for rural/suburban areas, 0% down)

A higher score doesn’t just get you approved — it can save you tens of thousands in interest over the loan’s life.

The Bottom Line

“How much house can I afford?” is really two questions:

How much will a bank lend me? (Often too much.)
How much should I spend? (Usually less than #1.)

The 28/36 rule answers #2. Use it as your ceiling, but aim lower if you want room for retirement savings, travel, kids’ education, and an actual life. The most financially successful homeowners I know didn’t buy the most house they could — they bought the least house that made them happy, and invested the difference.

Run your numbers with our free mortgage calculator, and remember: a home you can comfortably afford is worth far more than a bigger one that keeps you up at night.