“How much house can I afford?” is usually the very first question that pops into your head when you start thinking about buying a home. It’s also the question people answer wrong most often, because there are really two answers hiding inside it: the number a lender will approve you for, and the number you can actually live with once the mortgage, the groceries, the car payment, and the occasional emergency all share the same paycheck. Those two numbers are rarely the same. This guide walks through both, in plain English, so you can land on a price that feels like a home and not a trap.
We’ll cover the classic 28/36 rule (and what “DTI” actually means), the full monthly payment that goes way beyond principal and interest, how your down payment, interest rate, credit score, and existing debts move the number up or down, and a couple of worked examples at real-world incomes. By the end you’ll be able to estimate your own range and, just as importantly, know why you might choose to buy for less than the bank says you can.
If you’d rather just plug in numbers, our mortgage calculators do the arithmetic for you. But understanding the “why” behind the math is what keeps you from becoming house-poor, so stick with us for a few minutes first.
The 28/36 rule, explained like a friend
Lenders don’t guess at what you can handle. They lean on a decades-old guideline called the 28/36 rule, and once you know it, you can run the same math on yourself before you ever talk to a loan officer.
Here’s the rule in one breath: spend no more than 28% of your gross monthly income on your housing payment, and no more than 36% of your gross monthly income on all your debt payments combined (housing plus everything else). “Gross” means before taxes and deductions come out — the top-line number on your pay stub.
The first number (28%) is your front-end ratio. The second (36%) is your back-end ratio, and it’s the one lenders care about most. Together they’re a version of your debt-to-income ratio, or DTI — the single most important number in the whole approval process.
What DTI actually means
Debt-to-income ratio is exactly what it sounds like: the slice of your monthly income already promised to debt payments. Add up your future mortgage payment plus your car loan, minimum credit card payments, student loans, and any other monthly debt, then divide by your gross monthly income. Multiply by 100 and you have your DTI as a percentage.
Say you earn $6,000 a month before taxes, and your debts (including the new mortgage) would total $2,100 a month. That’s $2,100 ÷ $6,000 = 0.35, or a 35% DTI. Comfortably under the 36% line.
One friendly note: things like utilities, groceries, gas, phone bills, streaming, and childcare are not counted in DTI. Lenders only look at debt on your credit report. That’s a big reason the “approved” number can feel too high — it ignores a huge chunk of real life. More on that in a minute.
The 28/36 rule isn’t a hard law
It’s a guideline, and different loan programs stretch it. FHA loans often allow a back-end DTI up to 43%, and sometimes into the high 40s or even 50%+ with strong “compensating factors” like a big savings cushion or a high credit score. Conventional loans backed by Fannie Mae can go up to 45%, occasionally 50%. So the bank may well approve you well above 36%. That doesn’t mean you should take it.
What a lender approves vs. what you should actually spend
This is the heart of the whole thing, so let’s be blunt about it. A lender’s job is to figure out the largest loan you can probably repay without defaulting. Your job is to figure out the largest payment you can make while still living a life you enjoy. Those goals overlap, but they are not the same goal.
A pre-approval letter might say you qualify for a $2,400 monthly payment. But if that number assumes you’ll stop contributing to retirement, skip vacations, and pray the water heater never dies, it’s not really affordable — it’s survivable. Big difference.
A more honest personal target is to keep your total housing payment under about 25–28% of your gross income, and to make sure that after the mortgage and your regular living costs and a monthly savings contribution, there’s still breathing room. Some people use a simpler gut-check: could you still cover the payment if your household lost a chunk of income for a few months? If the honest answer is “not without panic,” aim lower.
Would we send a sibling into the top of their approval range with no cushion? No. We’d tell them to buy the house that lets them sleep at night. That’s the whole philosophy here.
The full monthly payment: PITI, HOA, and PMI
When people picture a mortgage payment, they usually think of just the loan itself. But the check you write each month bundles several things together, and skipping any of them is how budgets blow up. The industry shorthand is PITI, and then there are two common add-ons.
- P — Principal. The part that actually pays down what you borrowed.
- I — Interest. The lender’s fee for the loan, largest in the early years.
- T — Taxes. Property taxes, usually collected monthly into an escrow account and paid on your behalf. These vary wildly by location — from well under 0.5% of home value per year in some states to over 2% in others.
- I — Insurance. Homeowners insurance, also often escrowed. Budget a few hundred to over a thousand dollars a year depending on where you live and what you’re insuring.
Then, depending on your situation:
- HOA dues. If you buy a condo or a home in a homeowners’ association, monthly dues can run anywhere from modest to several hundred dollars. Lenders count this against you, and it’s easy to forget when you’re daydreaming about the place.
- PMI — private mortgage insurance. If you put down less than 20% on a conventional loan, you’ll typically pay PMI, roughly 0.3% to 1.5% of the loan amount per year, until you build enough equity. (FHA loans have their own version called MIP.) We break this down fully in our guide to PMI.
The takeaway: when you estimate affordability, use the whole payment — PITI plus HOA plus PMI — not just principal and interest. A quote of “$1,600 principal and interest” can easily become $2,100+ once everything’s stacked on. Our closing costs guide covers the one-time upfront money, too, which is separate from all of this.
Four things that move your number the most
1. Your down payment
A bigger down payment means you borrow less, which lowers your monthly payment on two fronts: a smaller loan and, once you cross 20% down on a conventional loan, no PMI. But you don’t need 20% to buy — that’s a myth we bust in how much down payment you really need. FHA allows 3.5% down, many conventional loans allow 3%, and VA and USDA loans can require nothing down at all. A low down payment gets you in the door sooner; a high one lowers your payment and gives you a cushion. It’s a genuine tradeoff, not a right-or-wrong.
2. Your interest rate
Rates have an outsized effect because they apply to the entire balance for decades. Even a one-percentage-point difference can swing your payment by a couple hundred dollars a month on a typical loan, which in turn changes how much house fits your budget. This is why locking a good rate — and shopping more than one lender — matters so much. A slightly better rate can be worth tens of thousands of dollars over the life of the loan.
3. Your credit score
Your credit score doesn’t directly set your budget, but it shapes the rate and terms you’re offered, which then shapes your budget. Higher scores generally unlock lower rates and cheaper (or no) mortgage insurance. Even a 20–40 point improvement before you apply can nudge you into a better pricing tier. If your score needs work, see our credit score requirements guide before you shop.
4. Your existing debts
Because lenders cap your total DTI, every existing monthly payment eats into the mortgage payment you can qualify for. A $500 car payment can knock tens of thousands of dollars off your maximum price. Paying down or paying off a loan before you apply can meaningfully increase how much house you can afford — sometimes more efficiently than saving a bigger down payment. It’s worth doing the math both ways.
Worked example #1: $75,000 household income
Let’s make this concrete. Imagine a household earning $75,000 a year — that’s $6,250 gross per month. We’ll apply the 28/36 rule.
- 28% front-end limit: $6,250 × 0.28 = about $1,750 for the total housing payment (PITI + HOA + PMI).
- 36% back-end limit: $6,250 × 0.36 = about $2,250 for all debts combined.
Now suppose this household has a $400 car payment and $150 in minimum student loan and credit card payments — $550 in non-housing debt. Subtract that from the $2,250 back-end limit and you’re left with about $1,700 for housing. So the binding constraint here is roughly $1,700/month all-in.
Out of that $1,700, you have to carve out property taxes, insurance, and possibly PMI and HOA before you even get to principal and interest. If taxes and insurance eat, say, $350 and PMI adds $80, that leaves about $1,270 for principal and interest. Depending on the interest rate, that supports a home price very roughly in the $230,000–$270,000 range with a modest down payment. Change the rate or the tax bill and that window slides.
Notice how the debts did the damage: without that $550 in payments, this household could have aimed a fair bit higher.
Worked example #2: $120,000 household income
Now a household at $120,000 a year — $10,000 gross per month.
- 28% front-end limit: $10,000 × 0.28 = $2,800 for housing.
- 36% back-end limit: $10,000 × 0.36 = $3,600 for all debt.
Say this household has $700 in monthly debt payments. That leaves $2,900 under the back-end cap — but the front-end cap of $2,800 is lower, so $2,800 is the ceiling. After taxes, insurance, and any PMI, principal and interest might land near $2,100–$2,300, supporting a home price roughly in the $400,000–$470,000 range with a moderate down payment, again depending heavily on rates and local taxes.
Here’s the “leave room to live” part: this household could stretch to the top of what a lender allows, but if they instead targeted a $2,300 all-in payment, they’d free up several hundred dollars a month for retirement savings, a home-repair fund, and simply enjoying life. Same income, very different stress level. That gap is where a happy homeowner and a house-poor one part ways.
These are illustrations, not quotes. Your real numbers depend on current rates, your exact taxes and insurance, your down payment, and your credit. Run your own figures in our calculators.
Leave room to live
If you take one thing from this guide, take this: the goal isn’t to buy the most house you can qualify for. It’s to buy a home that fits comfortably inside a full, funded life. A home you love at a payment that doesn’t scare you beats a bigger home that quietly runs your finances.
Before you settle on a number, make sure you’ve still got room for: an emergency fund (ideally three to six months of expenses), ongoing retirement contributions, the roughly 1% of home value per year that maintenance tends to cost, and the everyday stuff that makes life good. If a house forces you to zero out all of that, it’s too much house — no matter what the letter says.
And if the numbers don’t work yet, that’s useful information, not failure. Sometimes the smartest move is to spend a year paying down a car loan, nudging up your credit score, or saving toward down payment help. Speaking of which — you may not have to do it all yourself.
Don’t forget help exists
Thousands of programs across the country offer grants and low-cost second loans to help first-time buyers with down payment and closing costs. These can effectively raise your affordable price range by shrinking the cash you need up front. Start with our down payment assistance overview to see what might apply to you, and read the full first-time buyer guide to see how affordability fits into the bigger picture.
Frequently asked questions
How much house can I afford on a $60,000 salary?
At $60,000 a year ($5,000 gross per month), the 28% rule points to about $1,400 a month for your total housing payment, and the 36% rule caps all your debt around $1,800. Depending on your other debts, down payment, interest rate, and local taxes, that often supports a home price roughly in the $180,000–$230,000 range. Fewer existing debts and a lower rate push it higher; a big car payment pushes it lower.
What is the 28/36 rule?
It’s a lending guideline that says your housing payment should stay under 28% of your gross monthly income, and all your debt payments combined should stay under 36%. It’s a starting point lenders use to gauge affordability. Many loan programs allow higher ratios, but the 28/36 rule is a sensible target for keeping your budget comfortable.
Does the lender’s pre-approval amount tell me my budget?
Not really. A pre-approval tells you the maximum a lender is willing to risk, based mostly on your income and debts — it ignores your groceries, childcare, savings goals, and lifestyle. Treat it as a ceiling, not a target. Most people are happier buying somewhere below their pre-approval maximum so there’s room to save and breathe.
Should I include property taxes and insurance in my estimate?
Yes, always. Your real payment is PITI — principal, interest, taxes, and insurance — plus any HOA dues and PMI. Taxes and insurance alone can add several hundred dollars a month, and they vary a lot by location. Estimating with just principal and interest is the single most common way people underestimate what a home really costs.
How do my debts affect how much I can borrow?
A lot. Because lenders cap your total debt-to-income ratio, every monthly payment you already have — car loans, student loans, credit card minimums — reduces the mortgage payment you can qualify for. Paying off a loan before applying can raise your maximum home price meaningfully, sometimes more than an equivalent amount added to your down payment.
Is it smart to buy at the very top of my budget?
Usually not. Buying at your absolute maximum leaves no cushion for rate changes, income dips, or the surprise repairs that come with owning. Leaving a margin — say, targeting a payment somewhat below your approved limit — protects your finances and your peace of mind. A home should support your life, not consume it.
Can down payment assistance change how much I can afford?
Yes. Grants and low-cost second loans can cover part of your down payment or closing costs, reducing the cash you need up front. That can let you buy sooner, avoid draining your savings, or keep more cushion in the bank. Check our down payment assistance and grants pages to see what you might qualify for.
This article is for general education, not financial advice. Loan limits, interest rates, tax rates, and program rules change over time and vary by lender and location — confirm current figures with a licensed lender before making decisions.
Sources: Consumer Financial Protection Bureau (consumerfinance.gov), Fannie Mae (fanniemae.com), Federal Housing Finance Agency (fhfa.gov), U.S. Department of Housing and Urban Development (hud.gov).
Last reviewed July 2026.