The Short Answer
A common guideline is that you can afford a home priced at 3–4.5 times your gross annual income, depending on your debts, down payment, and local interest rates. But this rule of thumb hides a lot of nuance. Someone earning $100,000 with no debt can afford significantly more than someone earning $100,000 with $800/month in student loans.
The real answer depends on four factors: your income, your existing debts, your down payment, and current mortgage rates. This guide walks through each one.
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Open Affordability Calculator →The 28/36 Rule Explained
Lenders use the 28/36 rule to determine how much they'll lend you:
- 28% rule: Your total housing costs (mortgage payment, property tax, insurance) should not exceed 28% of your gross monthly income.
- 36% rule: Your total debt payments (housing + car loans + student loans + credit cards + any other monthly obligations) should not exceed 36% of your gross monthly income.
Whichever limit you hit first is your cap. If you have significant non-housing debt, the 36% rule will be more restrictive than the 28% rule.
28% of gross: $2,333/month max for housing
36% of gross: $3,000/month max for all debt
Existing monthly debts: $500 (car + student loans)
Available for housing (36% rule): $3,000 − $500 = $2,500
Limiting factor: The 28% rule ($2,333) is more restrictive
Max monthly payment: $2,333 including tax and insurance
Affordability by Income Level
The table below shows estimated maximum home prices at current rates (6.5%, 30-year fixed, 20% down, $500/mo existing debt, 1.2% property tax). Your actual number may differ.
| Annual Income | Max Monthly Payment | Approx. Max Home Price |
|---|---|---|
| $50,000 | $1,167 | $185,000 |
| $75,000 | $1,750 | $280,000 |
| $100,000 | $2,333 | $370,000 |
| $125,000 | $2,917 | $465,000 |
| $150,000 | $3,500 | $555,000 |
| $200,000 | $4,667 | $740,000 |
These are maximums based on the 28% rule. Many financial advisors recommend staying at 25% of take-home pay or lower for a more comfortable monthly budget.
How Interest Rates Change Affordability
Interest rates have an enormous impact on how much house you can buy with the same monthly payment. Here's what the same $2,000/month P&I payment buys at different rates:
| Rate | Loan Amount | Home Price (20% down) |
|---|---|---|
| 5.0% | $373,000 | $466,000 |
| 6.0% | $333,000 | $417,000 |
| 6.5% | $316,000 | $395,000 |
| 7.0% | $300,000 | $375,000 |
| 8.0% | $272,000 | $341,000 |
Each 1% increase in rates reduces your buying power by roughly 10–12%. This is why timing matters — the same income buys significantly more home in a low-rate environment.
The Hidden Costs People Forget
Your mortgage payment is not your total housing cost. Budget for these as well:
- Property tax: Typically 0.5–2.5% of home value per year, varies enormously by location
- Homeowner's insurance: $1,000–$3,000/year depending on location and coverage
- PMI: If you put less than 20% down, add 0.5–1% of the loan per year
- Maintenance: Budget 1–2% of home value per year for repairs and upkeep
- HOA fees: $200–$500/month for condos and planned communities
- Utilities: Often higher than renting, especially for larger homes
See your complete monthly cost including tax, insurance, and PMI.
Open Mortgage Calculator →How Debt Affects What You Can Afford
This is where most online calculators fall short. Your existing debt payments directly reduce how much you can spend on housing. The 36% total debt limit means every dollar of car payment, student loan, or credit card minimum reduces your housing budget dollar-for-dollar.
Person B: $100K income, $800/mo debt → can afford ~$310,000 home
Person C: $100K income, $1,500/mo debt → can afford ~$210,000 home
The difference between no debt and $1,500/month in debt is over $200,000 in buying power.
Should You Buy the Maximum You Can Afford?
Almost certainly not. The 28/36 rule represents the upper limit of what lenders will approve, not what's financially comfortable. Being "house poor" — spending so much on housing that you can't save, invest, or enjoy life — is one of the most common financial mistakes.
A more conservative approach: keep your total housing cost at 25% of take-home pay (not gross). This gives you room for retirement savings, an emergency fund, and the unexpected costs that come with homeownership.
Compare the full cost of renting vs buying over time.
Open Rent vs Buy Calculator →