Editorial note: This guide is for general education, not individualized financial advice. We independently research every topic and cite our sources. Our editorial standards · How we make money.
Quick answer
A traditional guideline says total housing costs should stay at or below 28% of your gross monthly income and all debt payments at or below 36%. On $100,000 of income with $500 of monthly debts, that means a housing payment of about $2,333. Your price range then depends on your down payment, interest rate, taxes and insurance.
Key takeaways
- Lenders focus on your debt-to-income (DTI) ratio, credit score, down payment and cash reserves.
- Being approved for a loan is not the same as being able to afford it comfortably.
- Budget for closing costs, moving costs, maintenance and an emergency fund that survives closing.
- Interest rates change affordability dramatically — recalculate whenever rates move.
In this guide
- The 28/36 rule
- Example
- From a payment to a price
- How the interest rate changes affordability
- What lenders actually look at
- Down payment: how much do you need?
- The costs beyond the mortgage
- Affordability from your budget’s point of view
- Ways to afford more house (safely)
- The bottom line
- Frequently asked questions
- Sources
The question “how much house can I afford?” really has two answers. The first is what a lender will approve — a number based on ratios and credit. The second is what you can comfortably pay while still saving, handling repairs and living your life. This guide covers both. For a quick estimate, open the home affordability calculator.
The 28/36 rule
A long-standing lending guideline uses two ratios based on gross monthly income (before taxes):
- Front-end ratio (28%): housing costs — principal, interest, property taxes, homeowners insurance, mortgage insurance and HOA dues — should be at or below about 28% of gross income.
- Back-end ratio (36%): all monthly debt payments including housing — car loans, student loans, card minimums — should be at or below about 36%.
The lower of the two limits sets your maximum housing payment.
Example
Gross income of $100,000 a year = $8,333 a month. Existing debts: $500 a month.
| Ratio | Calculation | Maximum housing payment |
|---|---|---|
| Front-end 28% | $8,333 × 0.28 | $2,333 |
| Back-end 36% | $8,333 × 0.36 − $500 | $2,500 |
| Limit | Lower of the two | $2,333 |
Many loan programs allow higher ratios — sometimes 43% or more for total debt — especially with strong credit or large reserves. But higher ratios leave less margin for everything else.
From a payment to a price
Once you know your target payment, the price you can afford depends on:
- Interest rate — the biggest swing factor.
- Down payment — more down means a smaller loan.
- Property taxes — which vary widely by location.
- Homeowners insurance and HOA dues.
- Mortgage insurance if you put less than 20% down on a conventional loan.
How the interest rate changes affordability
With a $2,333 total housing budget, 10% down, 1.1% property tax and $1,800 insurance per year on a 30-year fixed loan (before PMI):
| Interest rate | Approximate home price |
|---|---|
| 5.5% | about $362,000 |
| 6.5% | about $331,000 |
| 7.5% | about $303,000 |
Illustrative; excludes PMI and HOA dues.
A two-point change in rates moves the affordable price by roughly $60,000. That is why buyers should re-run their numbers whenever rates change, and why improving your credit score before applying can pay off.
What lenders actually look at
- Credit score — affects approval and your rate.
- Debt-to-income ratio — as above.
- Down payment — and where the money came from.
- Employment and income stability — typically two years of history.
- Cash reserves — savings left after closing, measured in months of payments.
- The property — appraisal and condition.
Down payment: how much do you need?
| Loan type | Typical minimum down |
|---|---|
| Conventional | 3% with certain programs; 20% to avoid PMI |
| FHA | 3.5% with a credit score of 580 or higher |
| VA | 0% for eligible borrowers |
| USDA | 0% for eligible borrowers and areas |
A larger down payment lowers your monthly payment, can reduce your rate and may eliminate mortgage insurance. But draining every dollar of savings to reach 20% down can leave you exposed to early repairs. Many buyers balance the two.
The costs beyond the mortgage
This is where many first-time buyers get surprised:
- Closing costs: lender fees, appraisal, title insurance, recording fees and prepaid taxes and insurance — often a few percent of the loan amount.
- Moving and setup: movers, furniture, window coverings, tools.
- Maintenance and repairs: a common planning guideline is 1% to 2% of the home’s value per year, more for older homes.
- Utilities: usually higher in a house than an apartment.
- Rising taxes and insurance: your escrow payment can increase over time.
On a $350,000 home, setting aside 1% to 2% for maintenance means about $290 to $580 a month on top of the mortgage.
Affordability from your budget’s point of view
Instead of starting with what a lender allows, start with your monthly budget:
- Take your current take-home pay.
- Subtract savings goals (retirement, emergency fund) and non-housing expenses.
- What remains is the most you can spend on housing — including maintenance and utilities.
If that number is lower than the lender’s maximum, trust your budget.
Ways to afford more house (safely)
- Raise your credit score to qualify for a lower rate — see how to improve your credit score.
- Pay down debts to lower your back-end ratio.
- Save a larger down payment.
- Explore first-time buyer programs and down payment assistance through your state housing finance agency.
- Shop multiple lenders for the best rate and costs.
The bottom line
Use the 28/36 guideline as a starting point, adjust for the interest rate and local taxes, and then check the result against your real budget and all the costs of owning a home. Run the numbers in the home affordability calculator and the mortgage calculator, and read our first-time home buyer guide for the full process.
Frequently asked questions
How much house can I afford on $75,000 a year?
What debt-to-income ratio do mortgage lenders want?
Should I buy at the top of my approved budget?
How much should I have saved besides the down payment?
Sources
- What is a debt-to-income ratio? — Consumer Financial Protection Bureau
- Owning a Home — Consumer Financial Protection Bureau
- Primary Mortgage Market Survey — Freddie Mac
This guide is part of our Mortgage hub and our complete personal finance guide. Spot an error? Request a correction.