How Much House Can I Afford? The Full Calculation
Most buyers can afford a home whose total monthly housing cost — principal, interest, property tax, insurance, and any PMI or HOA dues — stays at or below 28% of gross monthly income, with all debts together under 36%. On an $85,000 salary with $450 a month of existing debt, that works out to roughly a $278,000 loan at 6.5% over 30 years, or about a $310,000 home with 10% down.
The honest way to find your number: start from the monthly payment you can sustain, not the listing price.
The 28/36 rule in one line: lenders typically allow housing costs up to about 28% of gross monthly income (the "front-end" ratio) and total debt payments up to 36% (the "back-end" ratio). Whichever cap binds first sets your maximum. The price you can actually afford is usually lower than what a lender will approve, because approvals ignore maintenance, savings goals, and the possibility that rates or taxes rise.
Not financial advice. This guide is for information only. It is not a recommendation to borrow, lend, or take any financial action. Read the full disclaimer.
Start with the payment, not the price
Listings are priced as a single large number, but you do not pay that number — you pay a monthly figure for 15 to 30 years. That monthly figure has four parts, usually abbreviated PITI: principal and interest on the loan, plus property tax and homeowner's insurance. Add private mortgage insurance (PMI) if you put less than 20% down, and HOA dues where they apply. A $310,000 home with 10% down at 6.5% produces a principal-and-interest payment of about $1,760; with roughly $220 a month of tax and insurance the real obligation is about $1,980 — before maintenance, which a common rule of thumb prices at 1% of the home's value per year (another $258 a month here).
Working backwards from a payment is more honest than shopping by price because it forces every hidden cost into the calculation before you fall in love with a house. The rest of this guide does exactly that, twice, with real arithmetic you can rerun in the mortgage calculator.
The two ratios lenders actually use
The front-end ratio caps total housing cost at about 28% of gross (pre-tax) monthly income. The back-end ratio caps housing plus all other debt payments — car loans, student loans, credit card minimums — at 36% of gross income for a conventional "qualified mortgage," though many lenders and loan programs now approve back-end ratios of 43% and sometimes higher. Read more about how the ratio is computed in our debt-to-income definition, and check your own in the DTI calculator.
Worked example 1: $85,000 income, $450 a month of debts
Gross monthly income is $7,083. The front-end cap allows 28% × $7,083 = $1,983 for total housing. The back-end cap allows 36% × $7,083 = $2,550 for all debt; subtract the $450 of car and student loan payments and $2,100 remains for housing. The lower figure — $1,983 — binds.
Now strip out the non-loan parts. On a home around $310,000, property tax near 0.7% a year and a basic insurance policy run about $220 a month together. That leaves $1,983 − $220 ≈ $1,760 for principal and interest. At 6.5% over 30 years the payment factor is $6.3207 per $1,000 borrowed, so the loan ceiling is $1,760 ÷ 6.3207 × 1,000 ≈ $278,000. With 10% down, that supports a purchase price of roughly $310,000 — requiring about $31,000 of down payment plus $6,000–$15,000 of closing costs.
One caveat: with 10% down, PMI of roughly 0.5–1% of the loan per year ($115–$230 a month here) must itself fit inside the 28% cap. If it does not, the affordable price drops until it does — PMI is part of the same envelope, not extra money you can spend. See the equity definition for when PMI can be cancelled.
Worked example 2: $145,000 income, $600 a month of debts
Gross monthly income is $12,083. Front-end cap: 28% × $12,083 = $3,383. Back-end cap: 36% × $12,083 = $4,350; minus $600 of debts leaves $3,750. The 28% cap binds again. On a home near $575,000, tax and insurance run about $480 a month, leaving about $2,900 for principal and interest. At 6.5% over 30 years that supports a loan of about $458,800. With 20% down — about $114,700 — the affordable price is roughly $573,500, with no PMI because the loan-to-value is exactly 80%.
Notice what the second example shows: debts mattered less than the down payment. The 20% down payment removed PMI entirely and kept the whole 28% available for the house itself. Bigger down payments buy affordability twice — once by shrinking the loan, once by removing PMI.
Stress-test the payment before you commit
Your ceiling should survive bad news, not just fit today's budget. Two tests are worth running. First, the rate test: if you are considering an adjustable-rate loan or expect to refinance only if rates cooperate, ask what the payment becomes two points higher. On the $278,000 loan from example 1, moving from 6.5% to 8.5% lifts principal and interest from $1,760 to about $2,140 — an extra $380 a month, every month, indefinitely. If that number breaks the budget, the house is too expensive or the loan structure is too risky. Our fixed vs adjustable-rate guide walks through that trade-off in detail.
Second, the income test: could one earner in a two-income household carry the payment alone for six months? If the honest answer is no, keep a larger cash reserve or buy less house. Lenders do not run these tests for you; approval only means the loan fits their risk model today.
Scenario: borrowing the full approved maximum
Take Example 1 above: $7,083 of monthly income with $450 of existing debts. The 28% target caps housing at $1,983. A lender willing to stretch to a 43% back-end ratio would allow 43% × $7,083 = $3,046 of total debt; minus the $450 of debts, about $2,596 remains for housing — roughly $613 a month above the 28% target. That $613 is the entire buffer this guide builds elsewhere: maintenance at about $258 a month on a $310,000 home, savings, and room for a rate shock. Borrowing the maximum does not break the ratios; it spends the resilience. (Illustrative arithmetic from the figures above — rerun it with your own numbers in the DTI calculator.)
What affordability calculations usually forget
Four costs sit outside the tidy PITI number and routinely push buyers past their real limit:
- Closing costs of roughly 2–5% of the price — $6,200 to $15,500 on a $310,000 home. They must be paid in cash at signing and cannot be financed without raising the rate.
- Maintenance and repairs, commonly estimated at 1% of value per year: about $258 a month on that same home, lumpy and unavoidable.
- Moving, furnishing, and immediate fixes — typically several thousand dollars in the first ninety days.
- Rising escrow costs. Property taxes and insurance premiums climb over time; a payment that fits at closing grows 2–4% a year in many markets even with a fixed rate.
Frequently Asked Questions
How much house can I afford on a $100,000 salary?
Under the 28% rule, a $100,000 salary supports about $2,333 per month for total housing costs. At a 6.5% rate over 30 years that is a loan near $369,000 before property tax and insurance; once a typical $500 per month for those is included, the loan ceiling drops to roughly $280,000–$290,000, which with 10% down means a home price around $310,000–$320,000. Existing debts can lower the ceiling further through the 36% total-debt cap.
Should I buy at the maximum the lender approves?
Usually no. Lenders approve against gross income and may allow total debt payments of 43% or more of it, leaving little room for maintenance, savings, or a rate shock. Most buyers are safer targeting 25–28% of gross income for total housing and keeping three to six months of expenses in reserve after closing.
How much cash do I need beyond the down payment?
Plan for closing costs of roughly 2–5% of the purchase price, plus an emergency fund that survives the purchase. On a $310,000 home with 10% down that means about $31,000 of down payment, $6,000–$15,000 of closing costs, and ideally at least three months of the new housing cost left untouched.
The two caps interact
With heavy existing debts, the 36% cap binds first and shrinks what is left for housing. With few debts, the 28% housing cap binds. That is why paying off a $300-a-month car loan before applying can raise your affordable price by roughly $47,000 — $300 of freed monthly capacity supports that much extra loan at 6.5% over 30 years ($300 ÷ 6.3207 × 1,000).
Rerun the numbers with your own figures
Everything above is arithmetic, and you can redo it precisely: test price, rate, and term combinations in the mortgage calculator, confirm your ratios in the DTI calculator, and see where each payment goes over time in the amortization schedule calculator. When you are ready to approach lenders, our mortgage preapproval guide covers the documents, the credit checks, and how to compare Loan Estimates line by line.