How Much House Can I Afford?
Buying a home is one of the biggest financial decisions you'll ever make. This guide breaks down — in plain English — how to figure out a home price you can comfortably afford.
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Open the affordability calculatorWhat does "how much house can I afford" actually mean?
Affordability isn't a single number — it's a range that depends on your income, your existing debts, current interest rates, and how much risk you're comfortable carrying. There are really two answers to the question:
- What a lender will approve. Banks use formulas to decide the largest loan they'll give you based on income and debts.
- What you'll actually be comfortable paying. This is usually lower — it leaves room for savings, repairs, travel, and unexpected costs.
The smart move is to find a price that satisfies both. Just because a bank approves $500,000 doesn't mean you should spend it.
The 28% / 36% Rule Explained
The most widely used affordability benchmark is the 28/36 rule:
- 28% — Your monthly housing costs (mortgage, taxes, insurance) should not exceed 28% of your gross monthly income.
- 36% — Your total monthly debt payments (housing + car loans + credit cards + student loans) should not exceed 36% of your gross monthly income.
Quick example
If you earn $7,000/month gross, the 28% rule caps housing at $1,960/month, and the 36% rule caps total debt at $2,520/month. If you already pay $400/month for a car loan, your housing budget shrinks to about $2,120 under the 36% rule — whichever number is lower wins.
Example Scenarios
Example 1: $5,000/month income
At 28% DTI, the housing budget is about $1,400/month. After ~$300 for taxes and insurance, roughly $1,100 is available for principal & interest. At 6.75% over 30 years, that supports a loan of about $170,000. Add a $30,000 down payment and the max home price is around $200,000.
Example 2: $10,000/month income
At 28% DTI, the housing budget is about $2,800/month. After ~$600 for taxes and insurance, roughly $2,200 is available for principal & interest. At 6.75% over 30 years, that's a loan of about $340,000. With a $60,000 down payment, max price climbs to roughly $400,000.
Doubling your income doesn't quite double your max home price — taxes, insurance, and existing debts all scale differently. Use the affordability calculator to plug in your real numbers.
Factors That Affect How Much You Can Afford
- Income — Higher gross income directly raises your housing budget under the 28/36 rule.
- Interest rates — Even a 1% rate change can shift affordability by 10% or more. Lower rates mean more home for the same monthly payment.
- Existing debt — Car loans, credit cards, and student loans eat into the 36% total-debt cap, leaving less for housing.
- Down payment — A larger deposit boosts your max price dollar-for-dollar and may also remove PMI and unlock better rates.
- Loan term — A 30-year loan has a lower monthly payment than a 15-year, which raises your max price (but increases total interest).
How to Increase Your Home Affordability
- Increase your income — A raise, side income, or a co-borrower's income can meaningfully lift your budget.
- Pay down existing debt — Eliminating a $400/month car payment can add $50,000+ to your max home price.
- Save a larger deposit — Every extra dollar down adds directly to your max price and reduces monthly payments.
- Improve your credit score — A better score earns lower rates, which translates into a bigger budget at the same monthly payment.
- Shop interest rates — Comparing 3+ lenders can save you 0.25–0.5%, a meaningful boost to affordability.
Use a Calculator to Estimate Your Budget
Rules of thumb get you in the ballpark, but a calculator gives you a real number tailored to your income, debts, and the rates available today.
Estimate your home budget in seconds
Use our calculator to estimate how much house you can afford based on your personal situation — income, debts, down payment, and current rates.
Open Affordability CalculatorFrequently Asked Questions
How much income do I need to buy a house?
A common guideline is that your gross monthly income should be roughly 3.5× your monthly housing payment. For a $2,000/month mortgage, that's about $7,150/month or roughly $86,000/year. Income needs also depend on your debts, down payment, and interest rate.
What is a good debt-to-income ratio?
Lenders typically prefer a front-end DTI (housing only) of 28% or less and a back-end DTI (all debt) of 36% or less. Some loan programs allow up to 43–50%, but lower ratios mean better approval odds and rates.
Should I spend the maximum I can afford?
Usually no. Buying at the top of your budget leaves no cushion for repairs, lifestyle changes, or rate hikes. Most planners suggest keeping housing costs closer to 25% of take-home pay so you still have room to save and invest.
Does a bigger down payment help?
Yes — significantly. A larger down payment increases your max home price directly, lowers your monthly payment, can remove PMI at 20%, and may unlock better interest rates from lenders.
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Disclaimer: Educational content only — not financial advice. Real lender approvals and budgets vary based on credit, location, and loan program.