How Much House Can I Afford? The Complete Guide for 2026

Buying a home is the largest financial decision most people ever make. Get the math wrong and you could end up house-poor — struggling to cover your mortgage while other financial goals stall. Get it right and you build equity, stability, and long-term wealth.

This guide walks you through exactly how lenders determine what you can afford, the rules of thumb that actually work, and how to calculate your personal home-buying budget. We'll also cover how different down payments, interest rates, and debt levels change the equation.

The 28/36 Rule: The Industry Standard

The most widely used guideline in mortgage lending is the 28/36 rule. It says:

• 28% front-end ratio: Your monthly housing costs (mortgage principal, interest, taxes, and insurance — often called PITI) should not exceed 28% of your gross monthly income.
• 36% back-end ratio: Your total monthly debt payments (housing costs plus car loans, student loans, credit card minimums, and any other debt) should not exceed 36% of your gross monthly income.

Example: Applying the 28/36 Rule

Let's say your household earns $90,000 per year, or $7,500 per month before taxes.

• Maximum housing payment (28%): $7,500 × 0.28 = $2,100/month
• Maximum total debt (36%): $7,500 × 0.36 = $2,700/month

If you already pay $400/month toward a car loan and $200/month in student loans, your total non-housing debt is $600. Under the 36% rule, your maximum housing payment would be $2,700 − $600 = $2,100. In this case, both limits align at $2,100/month for housing.

But if your non-housing debt were $900/month instead, the back-end ratio would cap your housing payment at $1,800 — even though the front-end ratio says $2,100. The lower of the two always wins.

How Your Debt-to-Income Ratio (DTI) Affects Affordability

Your debt-to-income ratio is the single most important number in mortgage qualification. It's calculated as:

DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100

Different loan types allow different maximum DTI ratios:

• Conventional loans: Typically cap at 43-45% DTI, though some lenders allow up to 50% with strong compensating factors (excellent credit, large reserves).
• FHA loans: Can go up to 57% DTI in some cases, making them popular with first-time buyers who carry student debt.
• VA loans: No official DTI cap, though most lenders prefer under 41%. The VA uses a residual income test instead.
• USDA loans: Generally limited to 41% DTI.

Use our Debt-to-Income Ratio Calculator to see where you stand before applying.

How Much Down Payment Do You Need?

The size of your down payment directly affects how much house you can afford, your monthly payment, and whether you'll pay private mortgage insurance (PMI).

Down Payment Minimums by Loan Type

• Conventional: 3% minimum (first-time buyers) or 5% (repeat buyers). PMI required below 20%.
• FHA: 3.5% minimum with a credit score of 580+. 10% minimum with a score of 500-579.
• VA: 0% down for eligible veterans and active-duty military.
• USDA: 0% down for eligible rural properties.

The PMI Factor

If you put less than 20% down on a conventional loan, you'll pay PMI — typically 0.5% to 1.5% of the loan amount per year. On a $300,000 loan, that's $125 to $375 per month added to your housing cost. This extra expense reduces how much house you can actually afford.

Track when you can remove PMI with our PMI Removal Calculator.

What Lenders Look at Beyond DTI

While DTI is the primary affordability metric, lenders also consider:

• Credit score: Higher scores get lower interest rates, which means you can afford a larger loan for the same monthly payment. A 740+ score gets the best rates; below 620 limits you to FHA or non-QM loans.
• Cash reserves: Lenders like to see 2-6 months of mortgage payments saved after closing. More reserves can offset a higher DTI.
• Employment history: Two years of stable income in the same field is the standard. Self-employed borrowers typically need two years of tax returns.
• Property taxes and insurance: These vary dramatically by location and directly affect your monthly payment. A $400,000 home in Texas (high property taxes, ~2%) has a very different monthly cost than the same price home in Colorado (~0.5%).

A Step-by-Step Calculation

Here's how to calculate your affordable home price from scratch:

1. Start with gross monthly income. If you earn $100,000/year, that's $8,333/month.
2. Apply the 28% rule. $8,333 × 0.28 = $2,333 maximum for PITI.
3. Subtract taxes and insurance. Estimate property taxes (check local rates) and homeowner's insurance. If taxes are $350/month and insurance is $150/month, you have $2,333 − $500 = $1,833 for principal and interest.
4. Subtract PMI if applicable. If putting 10% down, estimate PMI at about $150/month. Now you have $1,683 for P&I.
5. Convert to loan amount. At a 6.5% interest rate on a 30-year fixed mortgage, $1,683/month in P&I supports a loan of approximately $266,000.
6. Add your down payment. If you have $30,000 for a 10% down payment, your maximum purchase price is about $296,000.

Skip the manual math — our Mortgage Affordability Calculator does all of this instantly with your actual numbers.

How Interest Rates Change What You Can Afford

Interest rates have an enormous impact on affordability. Here's what a $2,000/month P&I payment buys at different rates on a 30-year fixed mortgage:

• 5.0%: ~$373,000 loan
• 6.0%: ~$334,000 loan
• 7.0%: ~$301,000 loan
• 8.0%: ~$273,000 loan

A 2% increase in rate reduces your buying power by roughly $70,000 to $100,000 — even though your income hasn't changed. Use our Mortgage Payment Calculator to see how different rates affect your monthly payment.

What You Can Afford vs What Consider Spend

Lenders will tell you the maximum you qualify for. That number is almost always more than consider actually spend. Here's why:

• Lenders don't account for your other goals. They don't factor in retirement savings, college funds, travel, or emergency funds. They just look at debt and income.
• Maintenance costs are real. Budget 1-2% of the home's value per year for maintenance and repairs. On a $350,000 home, that's $3,500 to $7,000 annually.
• Lifestyle creep happens. A bigger house means higher utility bills, more furniture, and often a longer commute.

A more conservative approach: aim to keep your housing payment at 25% of gross income or less, especially if you have aggressive savings goals. Many financial planners recommend spending no more than 3x your annual household income on a home.

Special Situations

Self-Employed Buyers

If you're self-employed, lenders use your net income (after deductions) from the last two years of tax returns — not your gross revenue. This often means your qualifying income is lower than what you actually take home. Plan accordingly and consider reducing aggressive deductions in the two years before buying.

Buying with a Partner

Two incomes increase buying power significantly, but both partners' debts also count. Make sure you calculate DTI using combined income AND combined debts. Our Mortgage Affordability Calculator handles this — just enter your combined numbers.

First-Time Buyer Programs

Many states offer down payment assistance, reduced interest rates, or tax credits for first-time buyers. FHA loans remain the most accessible option with 3.5% down and flexible credit requirements. Check your state's housing finance agency for local programs.

Quick Affordability Cheat Sheet

Based on the 28% rule with a 6.5% rate, 30-year fixed, 10% down, and average taxes/insurance:

• $50,000 income: ~$175,000 home
• $75,000 income: ~$265,000 home
• $100,000 income: ~$355,000 home
• $150,000 income: ~$530,000 home
• $200,000 income: ~$710,000 home

These are rough estimates. Your actual number depends on your specific debts, credit score, location, and down payment.

Next Steps: Calculate Your Number

Rules of thumb are useful starting points, but your finances are unique. The best way to know exactly what you can afford is to run your real numbers through a calculator that accounts for all the variables.