How Much House Can I Afford?

You've been scrolling through Zillow, daydreaming about that kitchen island and the backyard with enough room for a firepit. It's fun until you ask the question that actually matters: how much house can I realistically afford? Not "how much will a bank lend me" - that number is almost always higher than what you should actually spend. The goal here is figuring out what keeps you financially comfortable, not what stretches you to the breaking point.

Let's walk through the rules, the ratios, and the real-world math so you can shop with confidence instead of anxiety.

The 28/36 Rule: Your Starting Point

The 28/36 rule is the most widely cited guideline in home affordability, and it's a solid starting point. Here's how it works:

• The 28% rule: Your total monthly housing costs should not exceed 28% of your gross monthly income. Housing costs include your mortgage payment (principal and interest), property taxes, homeowner's insurance, and PMI if applicable. This combined figure is often called PITI.
• The 36% rule: Your total monthly debt payments - housing costs plus car loans, student loans, credit card minimums, and any other recurring debt - should not exceed 36% of your gross monthly income.

Let's say you earn $75,000 per year. That's $6,250 per month before taxes. Under the 28% rule, your max housing payment would be $1,750. Under the 36% rule, your total debt payments should stay below $2,250. If you're already paying $400 per month toward a car loan and $200 toward student loans, that leaves $1,650 for housing to stay within the 36% limit - which is actually lower than the 28% number.

That's the important thing to understand: you need to satisfy both rules simultaneously. The lower number wins.

What Is Debt-to-Income Ratio?

Your debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes toward debt payments. Lenders care about this number a lot. There are actually two versions:

• Front-end DTI: Just your housing costs divided by gross income. The 28% target from the rule above.
• Back-end DTI: All debt payments (housing plus everything else) divided by gross income. The 36% target.

According to the Consumer Financial Protection Bureau, most conventional lenders prefer a back-end DTI of 36% or lower, though some will approve loans up to 43% or even 50% in certain cases. Just because you can get approved at a higher DTI doesn't mean you should. A DTI above 40% leaves very little breathing room for savings, emergencies, or just enjoying your life.

Calculate Your Mortgage Payment

Use the calculator below to see what your monthly mortgage payment would look like at different home prices, down payments, and interest rates. This will help you figure out what price range keeps you within the 28% housing cost target.

Beyond the Rules: What the 28/36 Rule Doesn't Tell You

The 28/36 rule is helpful, but it's not the whole picture. It uses gross income, not take-home pay. Depending on your tax bracket, state taxes, and retirement contributions, your actual take-home could be 25-35% less than your gross. A $1,750 housing payment looks very different when your monthly take-home is $4,200 versus $5,000.

Here are some factors the rule doesn't account for:

• Property taxes vary wildly: In New Jersey, you might pay 2.2% of your home's value annually. In Hawaii, it could be 0.3%. That difference alone can shift your affordability by hundreds of dollars per month.
• Maintenance costs are real: Budget 1-2% of the home's value per year for maintenance and repairs. On a $350,000 home, that's $3,500 to $7,000 annually.
• Your other financial goals matter: Are you saving for retirement? Building an emergency fund? Planning for kids? The 28/36 rule doesn't factor in whether you're maxing out your 401(k) or barely contributing.
• Lifestyle spending: If you love travel, dining out, or hobbies that cost money, buying at the very top of your affordability range means cutting back on everything else.

How Taxes Affect Your Take-Home Pay

Since the 28/36 rule uses gross income, it's important to understand how much of your paycheck you actually keep. Use this tax calculator to see your estimated take-home pay, then ask yourself: can I comfortably make housing payments of 28% of gross from what's left?

The Down Payment Factor

How much you put down directly affects how much house you can afford. Here's the math on a $350,000 home:

• 20% down ($70,000): You borrow $280,000. No PMI. At 6.5% interest over 30 years, your principal and interest payment is about $1,770.
• 10% down ($35,000): You borrow $315,000. Add PMI (roughly $130-200/month). Your total payment jumps to about $2,120-2,190.
• 3.5% down ($12,250 - FHA loan): You borrow $337,750. FHA mortgage insurance adds even more. Your total could be $2,350 or higher.

A smaller down payment means a larger loan, higher monthly payments, and the added cost of mortgage insurance. It also means less equity from day one, which leaves you more vulnerable if home values dip.

A More Conservative Approach

Some financial planners suggest an even more conservative target: keep housing costs under 25% of your take-home pay, not gross. This approach gives you more margin for savings, investing, and unexpected expenses. If your take-home is $4,500 per month, that means a housing budget of $1,125 - significantly less than the 28% of gross calculation.

Is that too restrictive? Maybe, depending on where you live. In high-cost cities, spending 25% of take-home on housing might mean renting or buying much further from the city center. The point isn't to follow any single rule rigidly. It's to understand the tradeoffs so you're making an intentional choice rather than just accepting whatever the bank approves.

How to Run Your Own Affordability Check

Here's a practical step-by-step process to figure out your number:

1. Calculate your gross monthly income. If you're salaried, divide your annual salary by 12. If your income varies, use the average of the past 12-24 months.
2. Apply the 28% rule. Multiply your gross monthly income by 0.28. That's your max housing payment target.
3. List all existing monthly debts. Car payments, student loans, credit card minimums, personal loans.
4. Apply the 36% rule. Multiply gross monthly income by 0.36, then subtract your existing debts. Compare this number to your 28% number. The lower of the two is your actual housing budget.
5. Subtract property taxes, insurance, and PMI. Look up typical property tax rates in your target area and insurance estimates. What's left is what you can spend on the mortgage itself (principal and interest).
6. Back into the home price. Use the mortgage calculator above to find what home price produces a P&I payment that fits your budget, given your expected down payment and current interest rates.

Common Mistakes to Avoid

The biggest mistake first-time buyers make is shopping at the top of their pre-approval amount. A bank might approve you for $450,000, but that doesn't mean you should spend $450,000. Pre-approval is based on lending risk, not on whether you'll actually be comfortable with the payment.

Other common mistakes include forgetting about closing costs (typically 2-5% of the purchase price), underestimating maintenance costs on older homes, and ignoring how property taxes might increase over time. Some areas reassess property values annually, which can push your housing costs up even with a fixed-rate mortgage.

The Bottom Line

Figuring out how much house you can afford isn't about finding a single magic number. It's about understanding where your money goes, what tradeoffs you're willing to make, and building enough margin so that your home is a source of stability rather than stress. Start with the 28/36 rule, adjust for your actual take-home pay and lifestyle, and don't let anyone pressure you into spending more than you're comfortable with. You'll sleep better in a home you can easily afford than in a dream house that keeps you up at night worrying about the payment.