Buyer Guide
How Much House Can I Afford? A Plain Math Guide for 2026 Buyers
Learn how much house you can afford using the 28/36 rule, two real budget examples, closing costs, and hidden ownership costs lenders never factor in.
How Much House Can I Afford? A Plain Math Guide for 2026 Buyers
Most people ask this question the wrong way around. They open a mortgage calculator, type in a list price they saw online, and see if the payment looks survivable. A better approach starts with your income, your debts, and the monthly number you can live with, then works backward to a price.
Lenders will tell you the most they are willing to lend. That figure and the amount you can comfortably carry are rarely the same number. This guide walks through how lenders do the math, runs two example budgets side by side, and shows where buyers tend to overspend without realizing it.
The Two Ratios Lenders Care About
Almost every mortgage approval comes down to your debt-to-income ratio, usually shortened to DTI. It compares your monthly debt payments to your gross monthly income, meaning your pay before taxes. Lenders look at it two ways.
The front-end ratio covers housing alone. That includes principal, interest, property taxes, homeowners insurance, mortgage insurance, and any HOA dues. The long-standing guideline is to keep this under 28% of gross income.
The back-end ratio adds every other monthly debt on your credit report. Car loans, student loans, minimum credit card payments, and personal loans all count. The traditional ceiling here is 36%, which is where the familiar 28/36 rule comes from.
How Far Lenders Will Stretch
Lenders treat the 28/36 rule as a starting point. Conventional loans run through automated underwriting can approve a back-end DTI as high as 50% when the borrower has solid credit and cash reserves. FHA loans commonly go into the low to mid 40s and sometimes higher with compensating factors.
VA loans use 41% as a benchmark, but they also look at residual income. That is the money left over each month after the mortgage, debts, and estimated living costs are paid. It is a sensible test, and it is worth running on yourself even if you are not a veteran.
Budget One: A $90,000 Household With Light Debt
Numbers make this easier to see. Picture a couple earning $90,000 a year combined. That works out to $7,500 a month before taxes.
At 28%, their housing ceiling is $2,100 a month. At 36%, total debts can reach $2,700.
They carry one car payment of $500, so $2,700 minus $500 leaves $2,200 for housing. The lower of the two numbers wins, so $2,100 is their target.
That $2,100 is not all mortgage. If property taxes and insurance run about $450 a month and private mortgage insurance adds roughly $100, the part left for principal and interest is around $1,550.
At an example rate of 6.5% on a 30-year fixed loan, $1,550 a month supports a loan of about $245,000. With 10% down, that points to a purchase price near $272,000 and a down payment of roughly $27,000. Rates, taxes, and insurance vary a lot by market, so treat these figures as approximate and swap in your own.
Budget Two: Same Income, Heavier Debt
Now keep the income at $90,000 and change one thing. This household has a $650 car payment and a $400 student loan payment, for $1,050 in monthly debts.
The front-end limit is still $2,100. The back-end math tells a different story: $2,700 minus $1,050 leaves only $1,650 for housing. That lower number becomes the real limit.
Take out the same $550 for taxes, insurance, and PMI, and about $1,100 remains for principal and interest. At 6.5%, that supports a loan of around $174,000. With 10% down, the price range drops to roughly $193,000.
Same paycheck, about $79,000 less house. The only difference is $550 a month in extra debt payments. If you are a year or two out from buying, paying off a car loan can do more for your budget than almost any other move.
What Moves the Number Up or Down
Your income sets the outer boundary, but several other inputs push the final price around. Some you control, some you only get to choose between.
Interest rate is the big one. On a $300,000 loan, the principal and interest payment is about $1,799 at 6%, $1,896 at 6.5%, and $1,996 at 7%. That full point of difference costs close to $200 a month, or around $71,000 over 30 years if you never refinance.
Credit score feeds directly into the rate you get. Moving from the mid 600s into the 740 range and above can mean a noticeably lower rate and cheaper mortgage insurance. Pull your reports early and fix errors before a lender does a hard inquiry.
Down Payment Size
A bigger down payment shrinks the loan and can remove mortgage insurance altogether on a conventional loan once you reach 20%. Plenty of buyers put down far less than that. Conventional programs start at 3% down for qualified first-time buyers, and FHA requires 3.5% with a credit score of 580 or higher.
Low down payment loans are a reasonable tool. Just remember that PMI on a conventional loan and the mortgage insurance premium on an FHA loan both add to the monthly payment you calculated above. On FHA loans with less than 10% down, that premium generally stays for the life of the loan unless you refinance.
Property Taxes and Insurance
Two homes at the same price can carry very different monthly costs. Property tax rates range from well under 1% of value in some states to over 2% in others. A $350,000 house in a high-tax county can cost several hundred dollars more each month than the same price in a low-tax one.
Insurance has become a bigger swing factor too. Homes in hurricane, wildfire, and hail zones often carry premiums far above the national norm. Get a real insurance quote on a specific property before you write an offer, because a guess can throw your budget off by $200 or more a month.
Costs That Never Show Up in the Payment
A lender approval covers the mortgage payment and nothing else. Owning a home comes with costs that do not appear anywhere in your DTI.
Maintenance is the obvious one. A common planning figure is 1% to 2% of the home's value per year. On a $300,000 house, that is $3,000 to $6,000 a year, or $250 to $500 a month you should set aside even if nothing breaks. Older homes and homes with aging roofs, water heaters, or HVAC systems sit at the high end.
Utilities often jump when renters move into a house. You may be heating and cooling twice the square footage, paying for water and trash directly, and running a lawn mower for the first time. Ask the seller or the utility company for the last 12 months of bills.
Cash You Need at Closing
Your down payment is only part of the cash needed to buy. Closing costs usually run 2% to 5% of the purchase price and cover lender fees, title insurance, appraisal, recording fees, and prepaid taxes and insurance.
On a $272,000 purchase, that could mean $5,400 to $13,600 on top of the down payment. Many lenders also like to see two or more months of mortgage payments left in the bank after closing. Draining every account to get the keys leaves you exposed the first time the furnace quits.
A Simple Way to Set Your Own Ceiling
Here is the order that tends to work best for buyers:
- Add up your gross monthly income and multiply by 0.28 and by 0.36.
- Subtract your current monthly debts from the 36% figure.
- Take the lower of the two results as your maximum housing payment.
- Subtract estimated taxes, insurance, mortgage insurance, and HOA dues.
- Use what remains to find a loan amount at a current rate quote, then add your down payment.
- Compare that monthly payment to your real take-home budget and adjust down if it feels tight.
Step six is the one people skip. Gross income ratios ignore retirement contributions, childcare, health insurance premiums, and savings goals. A payment that fits the 28% rule on paper can still crowd out everything else once taxes come out of the check.
Our rule of thumb: if the full housing payment is more than about a third of your take-home pay, slow down and look at a lower price range or a larger down payment. Being house poor is a real and miserable place to be.
Pre-Approval Gives You a Real Number
Online calculators are fine for planning. A pre-approval is where the estimate turns into something sellers will take seriously. The lender reviews your pay stubs, W-2s or tax returns, bank statements, and credit, then issues a letter showing the loan amount and program you qualify for.
Get pre-approved before you start touring homes seriously. It tells you whether the math in this guide holds up with your real credit score and rate, and it makes your offer stronger when you find the right place. Talking to two or three lenders is reasonable, since rates and fees vary, and credit inquiries for the same mortgage within a short window are generally scored as one.
A good buyer's agent will ask about your comfortable monthly payment, not only your approval amount. That conversation keeps your search focused on homes you can own without stress. You can find more buyer planning articles on our real estate blog for home buyers, including guides on down payments and working with agents.
Frequently Asked Questions
Can I afford a $400,000 house on a $100,000 salary?
It depends on your debts, down payment, and local taxes. With $100,000 in gross income, a 28% front-end limit allows about $2,333 a month for housing. If taxes, insurance, and PMI take $600 of that, the rest supports a loan near $274,000 at 6.5%, so a $400,000 price would need a large down payment or very low debts combined with a lender willing to go above 28%.
How much should I have saved before buying?
Plan for your down payment, 2% to 5% of the price for closing costs, and a cushion after closing. On a $300,000 home with 5% down, that adds up to roughly $21,000 to $30,000 before any reserve. Many lenders like to see at least two months of payments left over.
Does the 28/36 rule use gross or net income?
Lenders use gross income, which is your pay before taxes and deductions. That is why the approved amount often feels larger than what your bank account suggests you can handle. Running the same math against your take-home pay gives a more conservative and realistic budget.
Is it better to buy below my maximum approval?
For most buyers, yes. Staying 10% to 20% below the approved loan amount leaves room for maintenance, rising insurance premiums, and life changes like a new car or a job switch. A $350,000 approval that turns into a $300,000 purchase can free up roughly $300 a month at current rate levels.