Loans & Credit
Published July 9, 2026
The common guideline is the 28/36 rule: keep total housing costs under 28% of gross monthly income, and all debt payments under 36%. On $6,000 of gross monthly income that means about $1,680 for housing including tax and insurance, and $2,160 for every debt payment combined.
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.
Apply 28% of gross monthly income to housing. At $6,000 a month that is $1,680, and because that figure has to cover property tax and insurance as well as principal and interest, the mortgage itself must be smaller than the cap.
Two ceilings applied together. The front-end ratio limits housing to 28% of gross income. The back-end ratio limits all monthly debt payments, housing included, to 36%. Lenders use both, and the tighter one governs.
Yes. The cap applies to the full PITI payment, not just principal and interest. If property tax and insurance come to $500 a month, only about $1,180 of that $1,680 is available for the loan itself.
They eat into the 36% back-end limit. With $600 a month of car and student loan payments against $6,000 of income, only $1,560 of the $2,160 remains for housing, which is below the front-end cap and becomes the real constraint.
Twenty percent avoids mortgage insurance in most markets, but many loans allow far less. A smaller deposit means a larger loan, a higher payment and usually an insurance premium on top, all of which reduce the price you can support.
Usually not. Lenders test gross income against debt, and ignore childcare, commuting, saving and irregular costs. Approval tells you what you can borrow, not what leaves you comfortable, and the gap between those two is often large.
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. For official guidance on this topic, see the CFPB's home-buying resources.
This article is for educational purposes only and is not financial advice. See our Disclaimer.