Key takeaways
- Lenders usually cap housing costs near 28% of gross monthly income, and housing plus other debts near 36%, though many allow more.
- With $40,000 down at 6.5%, a $100,000 salary supports a home price of about $323,729 under the 28/36 rule.
- Your other debts, the interest rate, and property taxes move that number as much as your salary does.
- The price a lender will approve is a ceiling. Leave room in your budget for maintenance, savings, and surprises.
“How much house can I afford?” has two answers: what a lender will approve, and what fits your life. This guide works through the first one the way lenders do, then shows how to pressure-test it.
How lenders size your mortgage
Lenders don’t start with the home price. They start with your gross monthly income and ask what share of it can go to debt. That’s your debt-to-income ratio (DTI), and it comes in two versions:
- Front-end ratio: the full housing payment (PITI plus PMI and HOA dues) divided by gross monthly income. A common guideline is 28%.
- Back-end ratio: housing plus every other monthly debt payment (car loan, student loans, credit card minimums, child support) divided by gross income. The classic limit is 36%.
Whichever limit you hit first sets your maximum payment. Working backward from that payment, through the interest rate, taxes, and insurance, gives the maximum loan. Add your down payment and you have the maximum price.
What each salary can afford
Here’s the 28/36 rule applied to common salaries, assuming $40,000 down, a 30-year fixed rate of 6.5%, property taxes of 1.1% of the price, $1,500 a year for insurance, PMI at 0.5% of the loan, and $400 a month in other debt payments:
| Salary | Max home price | Monthly housing payment | Limit that binds |
|---|---|---|---|
| $60,000 | $201,789 | $1,400 | Both |
| $80,000 | $262,759 | $1,867 | 28% front-end |
| $100,000 | $323,729 | $2,333 | 28% front-end |
| $125,000 | $399,942 | $2,917 | 28% front-end |
| $150,000 | $476,155 | $3,500 | 28% front-end |
A few patterns stand out. The affordable price scales roughly with income, since the payment is a fixed share of pay. And a fixed down payment matters less as prices rise: at the high end, $40,000 is under 10% of the price, so PMI stays in the payment.
What moves the number besides salary
Take the $100,000 salary from the table, which supports about $323,729, and change one thing at a time:
| Change | Max home price | Difference |
|---|---|---|
| No other debts | $323,729 | $0 |
| $1,200/month in other debts | $254,049 | −$69,680 |
| Rate of 7.5% instead of 6.5% | $300,846 | −$22,883 |
| Lender allows 36/43 | $410,829 | $87,100 |
Paying off the $400 debt doesn't change the answer here: at this income, the 28% housing limit binds before the 36% total-debt limit does. A bigger debt load, like a $1,200 car payment plus student loans, flips that, and every dollar of debt payment then comes straight out of your housing budget.
Property tax rates range from well under 0.5% to over 2% of a home’s value depending on where you live. In a high-tax area, a large share of your allowed payment goes to the county instead of the loan, which lowers the price you can afford. Look up the actual rate for the towns you’re considering.
Approved vs. affordable
Many lenders will approve more than the 28/36 rule. Conventional loans often allow back-end ratios in the mid-40s to 50% with good credit and reserves, and FHA loans can go higher. That extra room is real money, but so are the costs lenders don’t count:
- Maintenance and repairs. A common rule of thumb is 1% to 2% of the home’s value a year.
- Utilities and commuting. A bigger or farther-out house can cost more to run.
- Savings goals. Retirement contributions, college savings, and an emergency fund don’t show up in DTI.
- Take-home pay. DTI uses gross income. After taxes and payroll deductions, a 28% housing ratio can be 35% to 40% of your take-home pay. Our paycheck calculator shows yours.
A practical approach: find the lender’s ceiling, then pick a target payment you’d be comfortable paying even in a tight month, and shop by that payment instead. The affordability calculator’s “by payment” mode works the math in that direction.
Ways to afford more without stretching
- Pay down other debts first, especially if the back-end limit is what’s holding you back.
- Shop your rate. Quotes can differ meaningfully between lenders on the same day. See how rate changes your payment in the mortgage calculator.
- Consider an FHA loan if a lower credit score is pushing your rate or PMI up. Compare the costs in FHA vs. conventional.
- Put more down, or get to 20% down to avoid PMI entirely. What PMI really costs walks through the trade-off.