🏠 How Much House Can I Afford?

The 28/36 Rule: A Quick Way to Estimate Affordability

Lenders often use the 28/36 rule to decide how much house you can afford:

• 28% Rule (Front-End Ratio):
  Your monthly housing costs (mortgage, taxes, and insurance) should not exceed 28% of your gross monthly income.
• 36% Rule (Back-End Ratio):
  Your total monthly debt (housing + car loans, credit cards, student loans, etc.) should not exceed 36% of your gross monthly income.

• Once you know your budget, estimate monthly payments using the Mortgage Calculator.
• Don’t forget to include taxes — try the Property Tax Calculator for accuracy.

Example:

If you earn $6,000 per month before taxes:

• Max housing expense = $6,000 × 28% = $1,680
• Max total debt = $6,000 × 36% = $2,160

That means if you already have $400 in other debts, you should aim for a mortgage payment around $1,760 or less.

How to Calculate How Much House You Can Afford

Here’s a step-by-step breakdown of the main factors:

1. Monthly Mortgage Payment You Can Afford

Decide how much you’re comfortable paying each month. Use this as the foundation for your budget.

2. Down Payment

The more cash you put down, the lower your loan amount and monthly payment.

• Typical minimum: 3% to 5% of the home price.
• Ideal: 20% (avoids private mortgage insurance, or PMI).

Formula:
Loan Amount = Home Price – Down Payment

3. Mortgage Term

• 30 years = lower monthly payments, more total interest.
• 15 years = higher monthly payments, less total interest.

4. Interest Rate

A small difference in mortgage rate can shift your buying power by tens of thousands of dollars. For example, a 1% higher interest rate could mean $200–$300 more per month.

5. Taxes & Insurance

Don’t forget property taxes and homeowners insurance. Together, they can add several hundred dollars per month.

Plain Text Formula for Home Affordability

Here’s a simple formula you can use:

Maximum Home Price = (Monthly Payment × Loan Factor) + Down Payment

• Monthly Payment: What you can afford each month
• Loan Factor: Based on loan term and interest rate (use mortgage tables or calculators to find)
• Down Payment: Your upfront cash contribution

Example Home Affordability Calculation

Let’s run the numbers:

• Income: $5,000/month
• Comfortable mortgage budget: $1,400/month
• Down payment: $40,000
• Interest rate: 6.5%
• Loan term: 30 years

At 6.5%, a 30-year mortgage has a loan factor of ~158.

Affordable Loan = $1,400 × 158 = $221,200
Home Price = $221,200 + $40,000 = $261,200

So, with these assumptions, you can afford a home around $260,000.

Affordability Calculator Inputs Explained

When using a How Much House Can I Afford Calculator, you’ll typically see these fields:

• Mortgage Payment “I Can Afford to Pay” – Your monthly budget for housing.
• Down Payment – Cash you’ll put toward the home.
• Mortgage Term – 15, 20, or 30 years.
• Interest Rate – Annual percentage rate (APR).
• Estimated Taxes – Annual property taxes, divided by 12.
• Estimated Insurance – Homeowners insurance, divided by 12.
• Home You Can Afford – Approximate purchase price.
• Approximate Mortgage You Need – The loan amount you’ll apply for.

How Much House Can I Afford by Income?

Here’s a quick reference table showing affordable home prices based on annual income, assuming 20% down, 6.5% interest, and the 28/36 rule:

Note: Actual numbers vary depending on debt, taxes, insurance, and interest rate.

Factors That Can Increase or Decrease Affordability

• Credit Score: Higher credit scores = lower interest rates.
• Debt-to-Income Ratio: Less debt = more home affordability.
• Down Payment: Bigger down payment = more buying power.
• Loan Type: FHA, VA, or USDA loans may allow smaller down payments.
• Location: Property taxes and insurance vary widely by state and city.

Tips to Afford More House

• Improve your credit score before applying for a mortgage.
• Pay down high-interest debt to lower your debt-to-income ratio.
• Save a bigger down payment to reduce your loan amount.
• Shop around for mortgage rates – even a 0.5% difference matters.
• Consider a longer loan term for lower monthly payments (though you’ll pay more interest overall).

Once you’ve determined your budget, explore the rest of our Loan Calculators to estimate mortgage payments, analyze property taxes, and plan your ideal repayment strategy.

How Much House Can You Afford?

The answer depends on your income, debts, down payment, and mortgage terms. Use the 28/36 rule, affordability calculators, and the formulas we’ve provided to get a reliable estimate.

Ultimately, how much house you can afford isn’t just what a lender approves—it’s what keeps your finances stable and leaves room for savings, emergencies, and a comfortable lifestyle.