How Much House Can I Afford?
Before you fall in love with a listing, it helps to know your real budget. The most widely used guideline is the 28/36 rule. This guide explains it, walks through an example, and shows how to turn a monthly budget into a target home price. To test any price against your own numbers, use the free mortgage calculator.
The rule of thumb: keep your housing payment ≤ 28% of gross monthly income, and total debt ≤ 36%. Within those limits, a mortgage usually stays comfortable.
What the 28/36 rule means
- The 28% (front-end ratio): your total monthly housing payment (principal, interest, taxes, insurance, plus PMI and HOA) should be no more than 28% of your gross (pre-tax) monthly income.
- The 36% (back-end ratio): all your monthly debt payments combined (housing plus car loans, student loans, credit card minimums, and so on) should stay at or below 36%.
Lenders use similar debt-to-income limits when deciding how much to approve, so this rule roughly mirrors what you'll actually qualify for.
A step-by-step example
Say you earn $90,000 a year, about $7,500 a month before tax.
| Step | Calculation | Result |
|---|---|---|
| Gross monthly income | $90,000 ÷ 12 | $7,500 |
| Max housing payment (28%) | $7,500 × 0.28 | ~$2,100/mo |
| Less taxes & insurance (est.) | −$450/mo | ~$1,650 for P&I |
| Loan that $1,650 supports (6.5%, 30-yr) | n/a | ~$261,000 |
| With 20% down → home price | $261,000 ÷ 0.80 | ~$325,000 |
So on a $90,000 salary, a home around $325,000 keeps you inside the 28% guideline, assuming a 20% down payment and no unusually high other debts. Change any of those and the number moves.
What changes your number
- Down payment: more down means a smaller loan for the same house, a lower payment, and possibly no PMI. It's the biggest lever you control.
- Interest rate: even a 1% difference noticeably changes the payment, and therefore the price you can afford.
- Other debts: a car loan or student loans eat into your 36% back-end room, lowering what's left for housing.
- Property taxes & insurance: these vary a lot by location; higher local taxes mean less room for principal and interest.
- Credit score: a stronger score earns a better rate, which stretches your budget further.
Afford vs. comfortable
The 28/36 rule tells you the maximum a lender is likely to be comfortable with, not necessarily what will feel good to live with. Many people deliberately aim below 28% to leave room for savings, retirement, travel, or emergencies. There's nothing wrong with buying less house than you qualify for; a smaller payment buys peace of mind.
Work it backwards: in the mortgage calculator, try different home prices and down payments until the total monthly payment lands at or below your 28% target. That's your realistic price range.
Frequently asked questions
What is the 28/36 rule?
Keep your housing payment at or below 28% of gross monthly income, and all debt payments combined at or below 36%. It's a simple affordability guideline that roughly matches what lenders approve.
How much house can I afford on $90,000 a year?
Roughly a $325,000 home: the 28% rule caps your payment near $2,100/month, which supports about that price at 6.5% with 20% down. Your down payment, debts, and rate will shift it.
Does my down payment affect affordability?
A lot. More down means a smaller loan, a lower payment, possibly no PMI, and maybe a better rate, so you can afford a higher price for the same monthly budget.
More mortgage guides
- What's in a mortgage payment? (PITI, PMI & HOA)
- How much is PMI, and how do I remove it?
- 15- vs 30-year mortgage: which is right for you?
This guide is general information, not financial advice. Affordability depends on your full situation. Confirm with a lender.
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