Loans & Credit
Published July 9, 2026
Buying a home is likely the biggest purchase of your life, so "how much house can I afford?" deserves a real answer — not a guess from a real-estate listing. The good news: lenders use a simple, transparent framework you can apply yourself in minutes. This guide walks through the 28/36 rule, shows what income you need for common price points, and explains how your down payment and existing debt move the number.
Lenders judge affordability using two debt-to-income ratios:
"Housing payment" here means PITI: Principal, Interest, property Taxes, and Insurance (plus HOA dues and PMI where they apply). It's not just principal and interest, which is why so many first-time buyers underestimate the true cost.
Say you earn $6,000 per month gross ($72,000/year):
If you already pay $400/month on a car loan, your available housing budget under the back-end rule is $2,160 − $400 = $1,760. The lower of the two limits governs — here the front-end $1,680 — so you'd target a PITI payment at or below that figure.
Enter your income, debts, down payment, and interest rate to see the home price and monthly payment you can comfortably afford.
Use the Loan Affordability Calculator →Working backward from the 28% rule (assuming roughly average interest rates, a modest down payment, taxes, and insurance) gives useful ballpark figures:
| Home Price | Approx. Down Payment (10%) | Rough Income Needed |
|---|---|---|
| $200,000 | $20,000 | ~$55,000/yr |
| $300,000 | $30,000 | ~$80,000/yr |
| $400,000 | $40,000 | ~$105,000/yr |
| $500,000 | $50,000 | ~$130,000/yr |
These are estimates — the real figure swings with interest rates, property-tax rates in your area, your down payment, and your other debts. Always model your own scenario rather than relying on a table.
A bigger down payment shrinks the loan, lowers the monthly payment, and — once you hit 20% — removes PMI. It can also earn you a lower interest rate. Even a few extra percentage points down can meaningfully raise your price ceiling.
Rates are powerful. On a $300,000 loan, moving from 6% to 7% adds roughly $200 to the monthly payment — enough to price some buyers out. When rates rise, either your budget or your target price has to give.
Every $100 of monthly debt payment reduces your housing budget dollar-for-dollar under the back-end ratio. Paying down a car loan or credit card before applying can noticeably increase your approval amount. Check your ratio with our DTI Calculator.
Two identical incomes in two different states can afford very different homes because property-tax rates vary enormously. Always use local tax and insurance estimates in your calculation.
A lender may approve you for more than you should spend. Approval is based on ratios; affordability is based on your real life — childcare, savings goals, travel, and breathing room. Many financial coaches suggest keeping housing closer to 25% of take-home pay for genuine comfort. Borrow for the life you want, not the maximum a bank will allow.
Roughly a $180,000–$230,000 home, supporting a housing payment near $1,400/month under the 28% rule — more with a bigger down payment and little other debt.
Keep housing costs under 28% of gross monthly income and total debt under 36%. It's the core guideline lenders use to assess affordability.
Generally about $75,000–$90,000 per year with a moderate down payment and limited debt. Higher rates or more debt push it up.
Yes — a larger down payment lowers your loan, monthly payment, and interest rate, and removing PMI at 20% frees up budget, all raising your affordable price.
Anchor your search to the 28/36 rule, factor in the full PITI payment, and remember that a smaller, comfortable payment beats stretching to the limit. Run your real numbers through the Loan Affordability Calculator and the Mortgage Calculator before you fall in love with a listing — knowing your ceiling makes you a calmer, stronger buyer.
This article is for educational purposes only and is not financial advice. See our Disclaimer.