How Much House Can I Afford? A Complete Affordability Guide
KingSeob Research Team
Last updated: March 2026 · 8 min read
Figuring out your home budget isn't about what a lender will approve you for. It's about what fits your life without constant financial stress. Here's how to calculate the right number for your situation.
Start with the 28/36 Rule
Lenders have used the 28/36 guideline for decades because it works. The first number, 28, means your total housing costs should stay at or below 28% of your gross monthly income. Housing costs here include your mortgage principal and interest, property taxes, homeowner's insurance, and any HOA fees or private mortgage insurance (PMI). This full bundle is sometimes called PITI.
The second number, 36, is your total debt-to-income (DTI) ratio. When you add your housing payment to every other monthly debt obligation—car loans, student loans, minimum credit card payments, personal loans—the combined total should stay below 36% of gross monthly income.
Let's put real numbers to this. If your household earns $90,000 per year, your gross monthly income is $7,500. Under the 28% rule, your maximum housing cost is $2,100 per month. If you're also paying $350 for a car loan and $250 toward student loans, the 36% total debt cap is $2,700, which leaves just $2,100 for housing anyway. But if those debts were higher—say $800 combined—your housing budget drops to $1,900.
Translating Monthly Payments into Home Prices
Knowing your monthly ceiling is step one. Turning it into a purchase price requires factoring in the interest rate, loan term, taxes, and insurance. Here are some practical examples at a 7% interest rate on a 30-year fixed mortgage:
- $1,500/month housing budget: Supports roughly a $220,000 to $240,000 home with a 10% down payment, depending on local tax rates.
- $2,000/month housing budget: Puts you in the $300,000 to $330,000 range with 10% down.
- $2,500/month housing budget: Opens up the $370,000 to $410,000 bracket with 10% down.
- $3,500/month housing budget: Reaches approximately $520,000 to $570,000 with 10% down.
These ranges vary because property taxes differ dramatically by location. A home in New Jersey (average effective rate around 2.2%) costs significantly more per month than the same priced home in Colorado (around 0.5%). Always get local tax estimates rather than using national averages.
Want to run your own numbers? Our mortgage calculator lets you plug in your specific rate, down payment, taxes, and insurance to see exact monthly payments for any home price.
How Your Down Payment Changes the Math
The down payment is one of the biggest levers you have. It affects three things simultaneously: the loan amount, whether you pay PMI, and the interest rate you qualify for.
On a $350,000 home, here's the difference:
- 5% down ($17,500): Loan of $332,500. Monthly P&I about $2,212. Plus PMI of roughly $140-$280/month. Total: ~$2,350-$2,490 before taxes and insurance.
- 10% down ($35,000): Loan of $315,000. Monthly P&I about $2,096. PMI around $130-$260/month. Total: ~$2,226-$2,356.
- 20% down ($70,000): Loan of $280,000. Monthly P&I about $1,863. No PMI required. Total: ~$1,863.
That's a difference of nearly $500-$600 per month between 5% and 20% down. Over 30 years, the 20% down payment saves you over $65,000 in PMI alone, plus tens of thousands more in interest because the loan balance is lower.
That said, not everyone should wait to save 20%. If home prices in your area are rising 5-8% annually, waiting two more years to save a larger down payment could mean the target home now costs $30,000-$50,000 more. Run the numbers both ways using our loan calculator to find the better option.
The Costs Most Buyers Forget
Your mortgage payment is just the headline number. Here's what many first-time buyers don't budget for, and these costs add up fast:
Closing coststypically run 2-5% of the purchase price. On a $300,000 home, that's $6,000 to $15,000 due at signing. This covers lender fees, title insurance, appraisal, attorney fees, and prepaid taxes and insurance.
Maintenance and repairsare the expense most people underestimate. The general guideline is to set aside 1% of the home's value per year for upkeep. For a $350,000 home, that's $3,500 annually or about $290 per month. Older homes tend to need more, newer homes less, but roofs, HVAC systems, appliances, and water heaters all have finite lifespans.
Utilitiesare typically $200-$450 per month for a single-family home, depending on your climate and home size. If you're moving from an apartment where some utilities were included, this can be a real surprise.
HOA fees range from $100 to $700+ per month in planned communities and condos. Unlike your fixed mortgage payment, HOAs can and do increase over time.
Income-Based Quick Reference
Here's a straightforward reference table using the 28% rule at a 7% rate, 30-year term, 10% down, with an estimate for taxes and insurance included:
| Annual Income | Max Monthly Housing | Approximate Home Price |
|---|---|---|
| $50,000 | $1,167 | $160,000 - $180,000 |
| $75,000 | $1,750 | $250,000 - $280,000 |
| $100,000 | $2,333 | $340,000 - $370,000 |
| $125,000 | $2,917 | $420,000 - $460,000 |
| $150,000 | $3,500 | $510,000 - $560,000 |
| $200,000 | $4,667 | $690,000 - $750,000 |
These are starting estimates. Your actual number will shift based on existing debts, local tax rates, insurance costs, interest rate, and credit score. Plug in your exact details with our mortgage calculator for a precise breakdown.
A Smarter Approach: The 25% Take-Home Rule
The 28/36 rule uses gross income, which is your paycheck before taxes and deductions. Many financial planners recommend a stricter guideline: keep your housing payment at or below 25% of your take-home pay. This number is more realistic because it's based on money you actually have.
Someone earning $90,000 gross might take home around $5,600 per month after federal and state taxes, retirement contributions, and health insurance. At 25%, that's $1,400 for housing—notably lower than the $2,100 the 28% gross rule suggests. It's a more conservative target, but people who follow it almost never feel financially squeezed by their home.
What to Do Before You Start Shopping
Before looking at listings, do three things. First, get pre-approved (not just pre-qualified) by a lender. Pre-approval involves a credit check and income verification, so the number you get is much closer to reality. Second, check your credit report for errors—an incorrect late payment or wrong balance can drop your score and cost you a higher interest rate. Third, run the numbers on our mortgage calculator and loan calculator so you walk into the process with a clear budget based on your real monthly finances, not just what a lender tells you.
Financial Disclaimer
This article is for educational and informational purposes only and should not be considered financial advice. Consult a qualified financial advisor before making any financial decisions. KingSeob does not provide personalized financial recommendations.
Sources: Federal Reserve, Consumer Financial Protection Bureau (CFPB), U.S. Bureau of Labor Statistics
Frequently Asked Questions
How much house can I afford on a $75,000 salary?
Using the 28% rule, your maximum monthly housing payment would be about $1,750. With a 7% interest rate on a 30-year mortgage, that supports roughly a $260,000 to $280,000 home, assuming a 10% down payment and moderate property taxes. However, your existing debts (car payments, student loans) will lower this number based on the 36% total debt rule.
What is the 28/36 rule for buying a house?
The 28/36 rule says your monthly housing costs (mortgage, taxes, insurance) should not exceed 28% of your gross monthly income, and your total monthly debt payments (housing plus car loans, student loans, credit cards) should stay below 36% of gross monthly income. Lenders use this guideline to assess how much mortgage you can safely handle.
Does a bigger down payment help me afford more house?
Yes. A larger down payment reduces your loan amount, which lowers your monthly payment. It can also eliminate private mortgage insurance (PMI), which typically costs 0.5% to 1.5% of the loan amount per year. For a $300,000 home, putting 20% down instead of 5% saves you roughly $200-$400 per month between the lower loan amount and eliminated PMI.
What hidden costs do first-time home buyers miss?
Beyond the mortgage payment, expect to budget 1-3% of the home's value annually for maintenance and repairs, 1-2% for property taxes (varies by state), $1,200-$3,000 per year for homeowner's insurance, and $150-$400 per month for utilities. Closing costs typically run 2-5% of the purchase price. Many buyers also underestimate the cost of furnishing a larger space.
Should I buy the maximum house I'm approved for?
Generally, no. Lender approval represents the upper limit of what you can technically qualify for, not what you can comfortably afford. A good rule of thumb is to target a monthly payment that's 25% or less of your take-home pay (not gross). This leaves room for savings, emergencies, and lifestyle spending without feeling house-poor.