How Much House Can I Afford?

Start With a Number, Not a Dream

Most buyers begin house-hunting with a price range in mind and discover only later that the bank disagrees. The right way to figure out how much house you can afford is to work backward from your monthly gross income, your existing debts, and the cash you have for a down payment — not to start with a Zillow listing and hope the math works out.

This guide breaks down the three affordability rules lenders and financial planners actually use, shows the underlying math, and walks through worked examples at $60k, $100k, and $150k incomes. For a personalized estimate in seconds, run your numbers through our mortgage calculator with taxes, insurance, and PMI included.

The 28/36 Rule — The Lender's Baseline

The 28/36 rule is the foundation of conventional mortgage underwriting. It sets two ceilings on your gross monthly income:

• Front-end ratio (28%) — your total housing payment (principal + interest + property taxes + homeowners insurance + HOA dues, often abbreviated PITIA) should not exceed 28% of gross monthly income.
• Back-end ratio (36%) — your housing payment plus all other recurring debt (auto loans, student loans, minimum credit card payments, child support, etc.) should not exceed 36% of gross monthly income.

These ratios come from Fannie Mae and Freddie Mac underwriting standards for conventional loans. The 36% back-end ceiling can stretch to 43% for strong borrowers and up to 50% on some non-QM and jumbo programs, but each step up demands higher credit, deeper reserves, and a cleaner payment history.

For a deeper dive on how lenders evaluate your debt picture, see our debt-to-income ratio guide.

The 30% Rule — The Budgeting Heuristic

Older and simpler than 28/36, the 30% rule says no more than 30% of gross monthly income should go to housing. The U.S. Census Bureau uses this threshold to define "cost-burdened" households. It is a budgeting guideline, not a lending rule — lenders do not underwrite to it directly, but it tracks closely with the 28% front-end ratio.

The 30% rule is useful as a sanity check on lifestyle affordability. A lender may approve you at a 36% back-end ratio, but if your housing payment eats 38% or 40% of gross pay, you will feel the squeeze when the water heater fails or property taxes reassess upward. Most financial planners recommend staying closer to 28% to leave room for retirement contributions, emergency savings, and home maintenance (which averages 1% to 2% of home value annually).

The Multiplier Rules — Useful, But Blunt

You will sometimes hear rules of thumb like "your house should cost 2.5x to 3x your annual income." These multipliers were reasonable in a 4% rate environment but break down at higher rates. At a 7% rate, the same income supports a much lower purchase price because more of each payment goes to interest.

Treat multipliers as a rough ceiling, then refine with the 28/36 calculation or a calculator. A household earning $120,000 might safely afford a $300,000 home at 4%, a $250,000 home at 6.5%, and only a $220,000 home at 8% — the same income, the same down payment, very different budgets.

The Five Factors That Actually Decide Affordability

Income alone does not answer the affordability question. Five inputs together determine your maximum purchase price:

1. Gross monthly income — the denominator for every ratio. W-2 income is simplest; self-employment income is averaged over two years of tax returns.
2. Down payment — every dollar down is a dollar less financed, which lowers the monthly payment for the same purchase price (or lets you buy more house for the same payment). 20% down also eliminates PMI on conventional loans.
3. Interest rate — the single biggest swing factor. A 1% rate change on a $300,000 30-year loan shifts the payment by about $200/month, which translates to roughly $30,000 of purchasing power at the 28% ceiling.
4. Recurring monthly debts — student loans, car payments, credit card minimums, child support, alimony. Each dollar of monthly debt reduces the loan amount you qualify for by roughly $11 to $15 at a 6.5% rate.
5. Property taxes, insurance, and HOA — escrowed into your monthly payment and counted toward the front-end ratio. In high-tax states these can add $500 or more per month, materially lowering the maximum loan size.

Worked Example: $60,000 Salary

Gross monthly income: $5,000. Applying the 28/36 rule:

• Max housing payment (PITIA): $1,400/month (28% of $5,000)
• Max total debt payment: $1,800/month (36% of $5,000)

Assume $300/month in other debt (a $300 car payment, no student loans). That leaves $1,500 available for housing under the back-end ratio — well within the $1,400 front-end ceiling, so front-end is the binding constraint.

Breaking down the $1,400 housing budget with 5% down at a 6.75% rate, assuming $250/month property taxes and $100/month insurance:

• Taxes and insurance: $350/month
• PMI (5% down, ~0.5% annual): roughly $75/month
• Available for principal + interest: $1,400 − $350 − $75 = $975/month
• At 6.75% on a 30-year fixed, $975/month supports a loan of roughly $149,000
• With 5% down, max purchase price: about $157,000

In a low-tax state, the same income might support $170,000 to $185,000. With 20% down (no PMI) and a $40,000 down payment saved, the ceiling rises to roughly $195,000.

Worked Example: $100,000 Salary

Gross monthly income: $8,333. Applying the 28/36 rule:

• Max housing payment: $2,333/month
• Max total debt payment: $3,000/month

Assume $400/month in other debt. Back-end leaves $2,600 for housing — front-end is again binding.

With 10% down at 6.5%, $300/month taxes, $120/month insurance:

• Taxes and insurance: $420/month
• PMI (10% down, ~0.38% annual): roughly $95/month
• Available for principal + interest: $2,333 − $420 − $95 = $1,818/month
• At 6.5% on a 30-year fixed, $1,818/month supports a loan of roughly $288,000
• With 10% down, max purchase price: about $320,000

Worked Example: $150,000 Salary

Gross monthly income: $12,500. Applying the 28/36 rule:

• Max housing payment: $3,500/month
• Max total debt payment: $4,500/month

Assume $600/month in other debt. Back-end leaves $3,900 for housing.

With 20% down at 6.25%, $400/month taxes, $150/month insurance (no PMI):

• Taxes and insurance: $550/month
• Available for principal + interest: $3,500 − $550 = $2,950/month
• At 6.25% on a 30-year fixed, $2,950/month supports a loan of roughly $480,000
• With 20% down, max purchase price: about $600,000

Above the 2026 Fannie Mae conforming loan limit ($832,750 in most markets), you cross into jumbo loan territory with stricter credit and reserve requirements, but the underlying affordability math is the same.

Cash Reserves and Closing Costs — The Hidden Budget

Income ratios only tell part of the story. Two cash buffers sit on top of the monthly payment:

• Closing costs — typically 2% to 5% of the loan amount, due in cash at signing on top of the down payment. See our closing costs guide for the full breakdown.
• Reserves — most lenders want to see 2 to 6 months of PITIA in liquid assets after closing. Jumbo loans often require 12 months. Reserves do not change your monthly payment, but they cap how much of your savings you can deploy as down payment.

How to Increase What You Can Afford

If the calculator shows a lower ceiling than you hoped, four levers move the number:

1. Pay Down Consumer Debt

Every $100 of monthly debt you eliminate frees up $100 of housing budget under the 36% back-end rule, which at 6.5% supports roughly $16,000 more loan. Paying off a $400 car payment is worth about $64,000 of additional purchasing power — usually a far bigger lever than saving another few thousand for down payment.

2. Increase Your Down Payment

Each additional 5% down on a $300,000 home cuts the loan by $15,000, which at 6.5% saves about $95/month in principal and interest — or lets you buy roughly $15,000 more house for the same payment. Hitting 20% also eliminates PMI, freeing another $75 to $200/month.

3. Improve Your Credit Score

Mortgage rates are tiered by credit score. A borrower at 760+ typically pays 0.5 to 1.0 percentage points less than a borrower at 680. On a $300,000 loan, that spread is $100 to $200/month — worth roughly $16,000 to $32,000 in purchasing power. See our FHA vs conventional guide for how credit score shifts the loan-type decision.

4. Lock a Lower Rate

Buying the rate down with discount points, or waiting for a rate-cycle dip, can materially change affordability. Each 0.25% rate reduction on a $300,000 loan saves about $50/month — worth roughly $8,000 of purchasing power at the 28% ceiling. Read more in APR vs interest rate.

What Lenders See That You Might Miss

Three underwriting details catch buyers by surprise and can lower the real ceiling below what a calculator shows:

• Student loans on income-driven repayment — Fannie Mae uses 1% of the loan balance for the monthly payment in DTI if the payment is not amortizing, even if your actual IDR payment is $0. This can add $400+ to your debt side and shrink affordability sharply.
• Property tax reassessment — the seller's tax bill may reflect an old assessment. After purchase, the home reassesses at the sale price, and taxes can jump 30% to 100%. Lenders escrow for the new assessment, but only if they know about it.
• HOA and special assessments — monthly HOA dues count toward PITIA. A $300/month HOA reduces your max loan by roughly $48,000 at 6.5%. Pending special assessments may also need to be disclosed.

Putting It Together

How much house you can afford is the answer to three separate questions: how much will a lender approve (28/36 rule), how much can you carry without strain (closer to the 30% rule), and how much does your cash position support (down payment plus closing costs plus reserves). Run all three before you start shopping — the lowest of the three is your real budget.

Once you have your number, the next steps are getting pre-approved and choosing the right loan type for your situation. First-time buyers should also read our first-time homebuyer guide for down payment assistance programs that can materially raise your ceiling.