How Much House Can I Afford? A Complete Guide (2026)

⚡ Key Takeaways

The 28/36 rule: housing costs ≤28% of gross income; total debt ≤36%
Most lenders allow up to 43% debt-to-income ratio (DTI)
A larger down payment reduces your monthly payment and eliminates PMI above 20%
Your credit score significantly affects your mortgage rate — even 0.5% matters
Pre-approval is essential before house hunting in 2026's competitive market

How much house can I afford? is the most important question in any home-buying journey. Get it wrong in either direction and you'll either miss out on buying entirely or end up "house poor" — squeezed by a mortgage that dominates your budget. This guide gives you the exact math, the rules banks use, and a clear framework for your situation.

The 28/36 Rule: The Classic Starting Point

Financial advisors have long recommended the 28/36 rule as a guardrail for how much house you can afford:

28% rule: Your monthly housing costs (PITI — principal, interest, taxes, insurance) should not exceed 28% of your gross monthly income.
36% rule: Your total monthly debt payments (housing + car loans + student loans + credit cards) should not exceed 36% of gross monthly income.

The lower of these two numbers is your true affordability ceiling — at least by conservative standards.

Income-Based Affordability Table

Here's how much house different income levels can afford, assuming 20% down payment, 7% mortgage rate, and 1.2% property tax + insurance:

Annual Income	Max Monthly Payment (28%)	Max Home Price	Down Payment (20%)
$50,000	$1,167	$185,000	$37,000
$75,000	$1,750	$275,000	$55,000
$100,000	$2,333	$365,000	$73,000
$150,000	$3,500	$550,000	$110,000
$200,000	$4,667	$730,000	$146,000
$300,000	$7,000	$1,100,000	$220,000

Try our free Mortgage Affordability Calculator →

Down Payment Scenarios: How Size Changes Everything

The size of your down payment dramatically affects both what you qualify for and what you pay each month. Here's the math on a $400,000 home at 7% interest:

Down Payment	Amount Down	Loan Amount	Monthly P&I	PMI/mo
3%	$12,000	$388,000	$2,582	~$130
5%	$20,000	$380,000	$2,529	~$110
10%	$40,000	$360,000	$2,396	~$75
20%	$80,000	$320,000	$2,130	None
25%	$100,000	$300,000	$1,996	None

What Lenders Actually Look At

Banks use a formula more flexible than 28/36. Modern lending guidelines allow:

DTI up to 43% for conventional loans (sometimes 50% with strong compensating factors)
FHA loans: 31% front-end, 43% back-end DTI
VA loans: No front-end limit; 41% back-end DTI preferred
Credit score: 620 minimum for conventional; 580 for FHA; 760+ for best rates

Calculate your Debt-to-Income Ratio →

Hidden Costs First-Time Buyers Miss

When calculating affordability, most people only think about the mortgage. But true homeownership costs include:

Property taxes: 0.5%–2.5% of home value per year, depending on location
Homeowners insurance: $1,000–$3,000/year for most homes
HOA fees: $200–$500+/month for condos and many new developments
Maintenance: Budget 1%–2% of home value annually for repairs
PMI: 0.5%–1.5% of loan amount if your down payment is less than 20%
Closing costs: 2%–5% of loan amount, due upfront

Calculate your monthly mortgage payment →

How to Improve Your Affordability

Pay down debt. Eliminating a $400/month car payment can increase your home-buying budget by $60,000+.
Boost your credit score. Going from 680 to 740 can cut your rate by 0.5%, saving $40,000+ over 30 years.
Save more for a down payment. Every extra dollar down reduces your loan and eliminates PMI sooner.
Consider a longer loan term. A 30-year vs 15-year mortgage lowers monthly payments (though you pay more interest overall).
Explore first-time buyer programs. Many states offer down payment assistance, reduced rates, or closing cost help.

FAQ

How much house can I afford on a $100,000 salary?

Using the 28% rule, your max monthly housing payment is about $2,333. At current rates (~7%), that translates to roughly a $350,000–$375,000 home with 20% down. With 5% down, you could stretch to $320,000 but would pay PMI.

What is the 28/36 rule for mortgages?

The 28/36 rule states housing costs should be ≤28% of gross monthly income, and total debt (housing + all other debts) should be ≤36%. It's a conservative benchmark — lenders often allow higher ratios.

Is it better to put 20% down on a house?

Putting 20% down eliminates PMI, reduces your monthly payment, and gives you instant equity. But waiting to save 20% in a rising market can cost you more than PMI. Run the math for your local market.

How much income do you need to buy a $500,000 house?

With 20% down on a $500,000 home, your mortgage payment is roughly $2,661/month. To keep that under 28% of gross income, you'd need roughly $114,000/year in gross income.

Can I use rental income to qualify for a mortgage?

Yes. If you own rental properties, lenders typically count 75% of gross rental income toward your qualifying income, assuming you document the lease and property details.