How Much House Can You Afford? A Simple Guide

Reviewed by Anas Rabja, Founder & Editor · Last reviewed June 2026

Before you fall in love with a listing, it helps to know the honest answer to one question: how much house can you actually afford? Lenders will hand you a maximum loan amount, but that number is a ceiling, not a budget. A comfortable home purchase balances your income, your existing debts, your down payment, and the ongoing costs of ownership. This guide walks through the standard US rules of thumb and shows you how to turn them into a real dollar figure.

Start with the 28/36 rule

The most widely used affordability guideline in the United States is the 28/36 rule. It sets two limits based on your gross (pre-tax) monthly income:

• 28% — the front-end ratio: your total monthly housing payment should not exceed 28% of gross monthly income.
• 36% — the back-end ratio: all of your monthly debt payments together (housing plus car loans, student loans, credit cards and so on) should not exceed 36%.

Say you earn $90,000 a year, or $7,500 a month before taxes. The front-end limit is 0.28 × $7,500 = $2,100 for housing. The back-end limit is 0.36 × $7,500 = $2,700 for all debt. If you already pay $500 a month toward a car and student loans, your housing budget shrinks to $2,700 − $500 = $2,200 on the back end, so the binding limit is the lower front-end figure of $2,100.

Translate the payment into a price

Once you know your maximum monthly housing payment, you can work backward to a home price. Remember that a housing payment isn't only principal and interest — it also includes property taxes, homeowners insurance, and possibly private mortgage insurance (PMI) and HOA dues. A reasonable rule is to reserve roughly 25–30% of your housing budget for those extras.

From a $2,100 monthly budget, set aside about $500 for taxes, insurance and PMI, leaving roughly $1,600 for principal and interest. At a 6.5% interest rate over 30 years, about $1,600 a month supports a loan of roughly $253,000. Add your down payment and you have your target price.

Why the down payment changes everything

Your down payment is the cash you bring to the table, and it directly raises the price you can buy. On the $253,000 loan above:

• With a 10% down payment, that loan supports a home price near $281,000.
• With a 20% down payment, the same loan supports a price near $316,000 — and you skip PMI, freeing up even more monthly room.

A bigger down payment lowers your loan, your monthly payment and your lifetime interest all at once. It is the single most powerful lever most buyers control.

Costs people forget

Qualifying for a loan and comfortably owning a home are two different things. Before you stretch to the top of your range, budget for the parts the bank ignores:

• Maintenance and repairs — a common estimate is 1% of the home's value per year, so $3,000 annually on a $300,000 house.
• Closing costs — typically 2–5% of the loan amount, paid up front.
• Moving, furnishing and an emergency fund — buying a home is a poor time to drain your savings to zero.
• Higher utilities if you are moving from an apartment to a larger space.

A house that fits the 28/36 rule on paper can still feel tight if it leaves nothing for these realities. Many buyers deliberately target a payment below their maximum to keep breathing room.

Put real numbers behind it

Rules of thumb get you in the right neighborhood; a calculator gets you to a precise figure. Use our Mortgage Calculator to test how different prices, rates and down payments change your monthly principal and interest — the formula it uses is shown right on the page. To compare scenarios across any amount, rate and term, the Loan Calculator does the same amortization math and displays total interest, so you can see the long-run cost of borrowing more.

Frequently asked questions

What is the 28/36 rule?

The 28/36 rule says your housing payment should stay at or below 28% of gross monthly income, and all of your monthly debt payments combined should stay at or below 36%. Lenders use similar ratios when they decide how much to lend.

How much should I put down on a house?

A 20% down payment lets you avoid PMI, but many buyers put down less. A larger down payment lowers your loan amount, your monthly payment and the total interest you pay over the life of the loan.

Does the price I qualify for equal what I should spend?

No. A lender may approve you for more than is comfortable. Build your budget around the full monthly cost — including taxes, insurance, maintenance and savings goals — not the maximum a bank offers.

This article is for general education only and is not financial advice. Verify any figures with your lender before making a decision.