How Much House Can You Afford?
Here's the quick version: most buyers land somewhere around 3 to 5 times their gross annual income, with 20% down. Lenders run a tighter calculation called the 28/36 rule. Here's how it actually works.
Reviewed October 2026
Key takeaways
- Lenders use the 28/36 rule: at most 28% of gross monthly income on housing (PITI), and 36% on all debts combined.
- Quick shortcut: a home priced at 3–5× your gross annual income, with 20% down.
- Housing cost (PITI) = principal + interest + property tax + homeowner's insurance.
- Worked example: on a $120,000 salary, 28% caps housing at about $2,800/month.
The 28/36 rule, explained
Lenders look at two ratios, both based on your gross monthly income (before taxes):
Back-end ratio ≤ 36%: housing cost plus all other monthly debt payments (car loans, student loans, credit card minimums).
Some conventional loans stretch to 36/45. FHA allows up to 31/43. But 28/36 is still the benchmark for a payment you can actually sustain without sweating every month.
What counts as "housing cost"?
Here's what trips people up: lenders don't count just principal and interest. They count the full PITI, plus extras:
- Principal & interest: the mortgage payment itself
- Property taxes: often 0.8–2% of home value per year. Your state matters enormously here.
- Homeowner's insurance: typically $100–$250/month
- HOA dues: only if applicable, but sometimes several hundred dollars a month
- PMI: private mortgage insurance if your down payment is under 20%. Usually 0.3–1.5% of the loan per year, and it protects the lender, not you.
On a $400,000 home, taxes and insurance alone can add $400–$700/month on top of principal and interest. Any calculator that skips them is lying to you.
Worked example: $120,000 salary
| Step | Math | Result |
|---|---|---|
| Gross monthly income | $120,000 ÷ 12 | $10,000 |
| Max housing cost (28%) | $10,000 × 0.28 | $2,800/mo |
| Minus taxes + insurance + HOA | estimate | −$550/mo |
| Available for P&I | $2,250/mo | |
| Loan this supports (6.5%, 30-yr) | $2,250 ÷ 6.32 per $1,000 | ≈ $356,000 |
| Home price with 20% down | $356,000 ÷ 0.8 | ≈ $445,000 |
That's about 3.7× gross income. Right in the 3–5× shortcut range, like clockwork.
What the rule misses
- It uses gross income, not what hits your account. After taxes, that $2,800 could be 35%+ of your take-home pay. Run the numbers on net income too, or the rule will flatter you.
- Maintenance is nowhere in this math. Budget roughly 1–2% of the home's value per year for upkeep. Roofs don't care about your ratios.
- Your other goals are invisible to this rule. Saving for retirement? Carrying student debt? The back-end ratio only partly captures that. The rest is on you.
- Rates change everything. At 4% interest, the same payment buys far more house than at 8%. Rules of thumb quietly assume typical rates.
Run your own numbers
Plug in your income, debts, rate, taxes, and down payment. See your real price range, not the fantasy one.
Open the Mortgage CalculatorRenting instead? Compare the two
Find out whether buying or renting costs less over the years you actually plan to stay. Includes rent growth, appreciation, and the equity you'd build.
Open the Rent vs Buy CalculatorFrequently asked questions
What is the 28/36 rule?
Spend no more than 28% of gross monthly income on housing and no more than 36% on all debts combined. It's the standard lender guideline for sustainable mortgage payments.
What counts as housing cost in the 28% rule?
PITI — principal, interest, property taxes, homeowner's insurance — plus HOA dues and PMI when applicable.
How much house can I afford on $100,000 salary?
Roughly a $440,000–$470,000 home with 20% down at typical rates, assuming average taxes and insurance and no other major debts. Your local tax rates move this noticeably.
Is the 3x income rule accurate?
It's a decent shortcut near typical interest rates, but it breaks down when rates are very high or low. The 28/36 calculation is more reliable.
Does the 28/36 rule use gross or net income?
Gross. For a more conservative budget, many buyers redo the math on take-home pay.
Educational content, not financial advice. Tax rates, insurance costs, and lending standards vary — confirm details with a qualified professional before making decisions.