How Much House Can You Afford?
Affordability comes down to one key idea: how much of your income can you safely commit to housing each month, after your other debts and expenses? Lenders use the debt-to-income (DTI) ratio to answer that question.
The 28/36 rule is the most common benchmark: housing costs should stay under 28% of gross monthly income, and total debt payments under 36%. This calculator uses that ratio (adjustable) and works backward through the standard mortgage formula to estimate the maximum loan and home price you qualify for.
Factors That Affect Affordability
- Income — Higher gross income directly increases your housing budget.
- Interest rates — Even a 0.5% change can move your max home price by tens of thousands.
- Existing debt — Car loans, credit cards, and student loans reduce the budget available for housing.
- Down payment — More upfront = more home, lower payment, and possibly no PMI.
- Loan term — Longer terms (30 yr) reduce monthly payments and boost max price, but cost more interest overall.
- Property taxes & insurance — Vary widely by location and eat into your housing budget.
Example Calculations
Example 1: $5,000/month income
At 28% DTI with $300/mo other debts, the housing budget is $1,100/month. After about $250 for taxes and insurance, ~$850 is available for principal & interest. At 6.75% over 30 years, that supports a loan of roughly $131,000. With a $30,000 down payment, the max home price is about $161,000.
Example 2: $10,000/month income
At 28% DTI with $500/mo other debts, the housing budget is $2,300/month. After ~$550 for taxes and insurance, ~$1,750 is available for P&I. At 6.75% over 30 years that's a loan of about $270,000. With a $60,000 down payment, max price is roughly $330,000.
Should You Buy at Your Maximum?
Just because a lender approves a number doesn't mean you should spend it. Buying at the very top of your budget leaves no cushion for repairs, vacations, child care, retirement savings, or rate hikes if your loan is variable. Most planners recommend keeping housing costs closer to 25% of take-home pay for long-term comfort.
Try lowering the DTI slider above to see what a more conservative budget would look like. The freedom to invest the difference often beats the bigger house.
Frequently Asked Questions
How much income do I need to buy a house?
A typical guideline: gross monthly income of about 3.5× your monthly housing payment. For a $2,000/mo mortgage, that's about $86,000/yr.
What is a good debt-to-income ratio?
Lenders prefer 28% or less for housing alone, and 36% or less for all debt combined. Some loans allow up to 43–50%, but lower is always safer.
How do interest rates affect affordability?
A 1% rate change can shift affordability by 10%+. At 7%, $2,000/mo buys ~$300K of loan. At 6%, the same payment buys ~$333K.
Should I buy the maximum I can afford?
Usually not. Leave 10–20% of monthly budget as cushion for repairs, life events, and future flexibility.
What costs are not included here?
Closing costs, PMI, moving expenses, ongoing maintenance, and utilities. Budget an extra 1–2% of home value per year for upkeep.