How Much House Can I Afford? The Complete Formula for 2026
Updated August 2, 2026 • 10 min read • By the CalculatorMoney Team
Quick answer: To find how much house you can afford, multiply your gross annual income by 3 to 4.5. For a more precise figure, apply the 28/36 rule: your monthly housing costs should not exceed 28% of your gross monthly income, and total debt payments should stay below 36%. On a $75,000 salary, that means a home in the $225,000–$340,000 range.
I remember the first time I seriously sat down to figure out what I could actually afford. The mortgage pre-approval letter said one number, my gut said another, and my spreadsheet? That gave me a third. If you've been there, you're not alone.
Here's the thing most people get wrong: they start by looking at houses, then try to make the math work backwards. That's a recipe for being house-poor. Let's flip the script and start with what your finances can genuinely support.
The 28/36 Rule: Your Starting Point
Almost every lender in the US uses some version of the 28/36 rule when deciding whether to approve your mortgage. It's not a law, but ignoring it will either get your application denied or put you in a tight spot financially.
Maximum Monthly Housing Payment (Front-End Ratio)Max Housing = Gross Monthly Income × 0.28Maximum Total Debt Payment (Back-End Ratio)Max Total Debt = Gross Monthly Income × 0.36Available for Housing (if you have other debts)Max Housing = (Gross Monthly Income × 0.36) − Monthly Debt Payments
Take the lower of the two results. That's your realistic ceiling for monthly mortgage + property tax + homeowners insurance.
Step-by-Step: Calculate Your Affordable Home Price
Step 1: Find Your Maximum Monthly Payment
Grab your gross monthly income (before taxes). If you're a W-2 employee, that's your annual salary divided by 12. For freelancers, use your average over the last two years — lenders will anyway.
Your monthly payment isn't just mortgage principal and interest. You also need to budget for:
Property taxes: roughly 1.1% of home value per year nationally (varies widely by state — see the US Census Bureau's American Community Survey for your county)
Homeowners insurance: about $1,500–$2,500/year for a typical home
PMI: 0.5–1% of loan amount/year if you put down less than 20%. Use our PMI calculator to estimate your exact monthly cost.
Step 3: Convert to Maximum Loan Amount
Mortgage Payment Formula (P&I only)M = P × [r(1+r)^n] / [(1+r)^n − 1]
Where:
M = monthly payment (P&I)
P = loan principal
r = monthly interest rate (annual rate ÷ 12)
n = total number of payments (years × 12)
For a 30-year mortgage at 6.5% (check current rates via the Freddie Mac PMMS or CFPB):
r = 0.065/12 = 0.005417
n = 360
Factor = 6.32/1000 (per $1,000 borrowed)
So if your budget for P&I is $1,600/month: $1,600 ÷ 6.32 × 1,000 = $253,165 loan amount.
Step 4: Add Your Down Payment
With a $50,000 down payment: $253,165 + $50,000 = $303,165 maximum home price.
Not sure how much you can save for a down payment? Use our down payment calculator to map out a savings timeline.
Affordability by Income Level
Here's what different incomes can typically support, assuming a 20% down payment, a 30-year fixed rate, and moderate existing debts. Rates vary — verify current rates at consumerfinance.gov.
Annual Income
Max Monthly Payment
Max Loan (P&I)
Home Price (20% down)
$50,000
$1,167
$184,650
$230,800
$75,000
$1,750
$276,900
$346,100
$100,000
$2,333
$369,200
$461,500
$125,000
$2,917
$461,550
$576,900
$150,000
$3,500
$553,800
$692,200
$200,000
$4,667
$738,600
$923,200
Pro tip: Just because a lender approves you for $450K doesn't mean you should spend $450K. Aim for a payment that's 25% of your take-home pay, not 28% of gross. You'll thank yourself when the water heater dies or the roof needs work.
Interactive Calculator
You Can Afford
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5 Factors That Change Your Number
1. Interest Rate
Every 0.5% increase in your mortgage rate reduces your buying power by roughly 5–6%. At 6% you might afford $350K; at 7%, closer to $310K on the same income. Rate-shopping across 3–5 lenders is probably the highest-ROI hour you'll spend in this process. See the Federal Reserve's H.15 release for benchmark rate trends. Use our compound interest calculator to model how rate differences compound over a 30-year loan.
2. Down Payment Size
A bigger down payment does three things: increases your max home price dollar-for-dollar, eliminates PMI at 20%+, and gets you a lower rate. But draining your emergency fund for a down payment is dangerous — keep at least 3–6 months of expenses in reserve. Start with our down payment calculator to find a realistic savings target.
3. Property Tax Rates
New Jersey averages 2.23% while Hawaii sits at 0.32% (Source: US Census Bureau ACS). On a $400K home, that's the difference between $8,920/year and $1,280/year. Check your target county's rate before committing.
4. Existing Debt Load
That $500/month car payment isn't just costing you $500. It's reducing your home-buying power by roughly $79,000. If you're within a year of paying off a loan, waiting could significantly expand your budget.
5. Credit Score
Credit Score
Typical Rate Range
Monthly Payment*
Total Interest Paid
760+
Best available
Lower end
Less over 30 years
700-759
Competitive
Moderate
Moderate
660-699
Above average
Higher
More over 30 years
620-659
Subprime
Highest tier
Significantly more
*Exact rates vary by lender and market conditions. Check current rates at consumerfinance.gov or the Freddie Mac PMMS. Based on $300,000 loan, 30-year fixed.
Watch out: Some online "affordability calculators" don't include property taxes, HOA fees, or PMI. They'll show you a number that's $50K–$100K higher than what you can truly handle. Always calculate PITI (Principal, Interest, Taxes, Insurance) — not just P&I.
What Lenders Actually Look At
Your income and debts are the headline numbers, but underwriters dig deeper than that. Here's what moves the needle beyond the basic ratios:
Employment stability — 2+ years at the same employer (or in the same field) is the sweet spot
Cash reserves — they want to see 2–6 months of mortgage payments sitting in your account after closing
Debt trajectory — paying down debt shows discipline; taking on new debt right before applying is a red flag
Income documentation — W-2s, tax returns, pay stubs. Self-employed? Expect to hand over two years of full returns
Important: This guide is for general informational purposes only and does not constitute financial or mortgage advice. Affordability calculations are estimates based on common lending guidelines. For personalised advice, consult a licensed mortgage professional, HUD-approved housing counselor, or qualified financial advisor before making any home purchase decision.
Frequently Asked Questions
How much house can I afford on a $100,000 salary?
On a $100,000 annual salary, you can typically afford a home priced between $300,000 and $400,000 using the 28/36 rule. Your maximum monthly housing payment would be about $2,333 (28% of gross monthly income). With a 20% down payment and current mortgage rates, this translates to roughly $350,000–$460,000 in home value, depending on your existing debts and the property tax rate in your area.
What is the 28/36 rule for mortgages?
The 28/36 rule states that you should spend no more than 28% of your gross monthly income on housing costs (mortgage principal, interest, taxes, and insurance) and no more than 36% on total debt payments including housing. Lenders use this as a primary qualification guideline. Some loan programs like FHA allow higher ratios (up to 43% or even 50% back-end), but stretching beyond 28/36 increases your financial risk.
How much do I need for a down payment?
It depends on the loan type. Conventional loans typically require 5–20% down. FHA loans allow as little as 3.5% for borrowers with a 580+ credit score (see HUD.gov for current guidelines). VA loans (for veterans, via va.gov) and USDA loans (for rural areas) offer 0% down payment options. Putting 20% down eliminates PMI, saving $100–$300/month on a typical home.
Does my credit score affect how much house I can afford?
Yes, significantly. A higher credit score gets you a lower interest rate, which directly increases your buying power. On a $300,000 mortgage over 30 years, a 1% difference in rate can translate to $150–$200 more per month and over $50,000 in total interest. Improving your credit score by 40–60 points before applying can meaningfully expand your budget. Monitor your score for free at AnnualCreditReport.com.
Should I buy the most expensive house I can afford?
Generally, no. Financial advisors recommend spending less than your maximum approval amount. The bank's "affordable" calculation doesn't account for your lifestyle, savings goals, home maintenance costs (budget 1–2% of home value per year), or future life changes. A good rule of thumb: if the mortgage payment makes you uncomfortable when you imagine it alongside your other financial priorities, the house is too expensive.