It’s the question behind every home search: how much house can you actually afford — not just on paper, but in real life, with your income, debts, and long-term plans? The answer isn’t a single number a lender hands you. It’s a range you should work out yourself first, because a lender’s maximum and your comfortable maximum are usually very different.
Start With the 28/36 Rule
Mortgage lenders traditionally use the 28/36 rule as a starting benchmark:
- Your total housing cost (PITI: principal, interest, taxes, insurance) should stay under 28% of your gross monthly income.
- Your total monthly debt payments — housing plus car loans, student loans, credit cards — should stay under 36% of your gross monthly income.
So if your household earns $8,000 a month before taxes, the 28% line puts your housing budget at about $2,240 a month. That’s the ballpark to work within — and it’s wise to stay below it rather than treat it as a target.
The Four Numbers That Set Your Price Range
A mortgage payment comes from exactly four inputs, and each one changes what you can afford:
- Your down payment. More down means a smaller loan and a smaller payment. Twenty percent is the classic benchmark because it also avoids PMI.
- The interest rate. Rates are the hidden lever. A full percentage point on a 30-year loan can swing your payment by hundreds of dollars a month — and your total interest by six figures.
- The loan term. Thirty years keeps payments low; fifteen years builds equity far faster at the cost of much higher payments.
- Your local costs. Property taxes and insurance vary wildly by state and zip code, and they count toward that 28%.
Plug your numbers into our mortgage calculator to translate any home price into a monthly payment — then compare it against the 28/36 limits.
Don’t Forget the Hidden Costs
A mortgage payment is the biggest slice, but not the whole pie. Realistic budgeting includes:
- Property tax — often 0.5–2.5% of home value per year, depending on your state.
- Homeowners insurance — typically $1,000–$2,500+ a year, higher in coastal or storm zones.
- PMI — 0.5–1.5% of the loan per year if your down payment is under 20%.
- Maintenance — a common rule of thumb is 1% of the home’s value per year.
- HOA dues — anywhere from $100 to $1,000+ a month in some communities.
- Closing costs — 2–5% of the purchase price, paid upfront.
Add maintenance, HOA, and utilities to your PITI payment before you call it affordable.
How to Find Your Number in 5 Steps
Step 1 — Know your gross monthly income. Total household income before taxes and deductions.
Step 2 — List all monthly debts. Car payments, student loans, minimum credit card payments, any recurring obligations.
Step 3 — Apply the 28/36 rule. Multiply gross income by 0.28 for your housing ceiling and by 0.36 for your total-debt ceiling.
Step 4 — Estimate your true monthly housing cost. Use the mortgage calculator with tax, insurance, and HOA included, plus an allowance for maintenance.
Step 5 — Stress-test it. Could you still afford the payment if rates rose half a point, or if your income dipped for a few months? Keep an emergency fund of at least 3–6 months of housing costs.
What About Being Pre-Approved?
A pre-approval tells you what a lender will lend you — based on your credit, income, and debts — not what you should borrow. Lenders often approve up to 43–50% back-end debt ratios on some loan programs, far beyond the comfortable 36%. Treat pre-approval as an upper limit for negotiations, not a budget.
If you’re self-employed, expect extra scrutiny: lenders typically average two years of income, and variable earnings get discounted.
Example: What Does $100,000 of Income Buy?
A household earning $100,000 a year has gross monthly income of about $8,333. The 28% housing ceiling is roughly $2,333 a month. With a 20% down payment and a 6.5% rate on a 30-year loan, $2,333 a month in principal and interest supports a loan of about $369,000 — roughly a $460,000 home. Add property tax, insurance, and HOA, and the comfortable price moves lower, often into the low $400,000s. Change the rate to 5.5%, and the same income comfortably covers more home. Small inputs, big differences — which is exactly why you should model your own scenario.
The Bottom Line
“How much house can I afford?” is really three questions: what a lender will allow, what the 28/36 rule suggests, and what lets you sleep at night. Answer all three, stay under the benchmark rather than at it, and you’ll buy a home that builds wealth instead of stress. Start by running your numbers through our mortgage calculator — five minutes there can save you from years of being house-poor.
Try Our Free Calculators
Put this guide into practice with our free tools: Home Affordability Calculator, Mortgage Calculator, Closing Cost Calculator.