How Much House Can I Afford? Rules, Ratios & Calculator
Use the 28/36 rule, debt-to-income ratios, and real numbers to find a home price you can actually afford.
Keep total housing costs under about 28% of gross monthly income and all debt payments under 36%, then buy below your pre-approval ceiling so repairs and rate changes do not break your budget.
What you'll walk away with
Skim these first — then dig into the details below.
- 1The 28% rule: housing costs should not exceed 28% of gross monthly income.
- 2The 36% rule: total debt payments should not exceed 36% of gross income.
- 3Pre-approval amounts are ceilings, not targets — buy below your max.
- 4Budget for maintenance, closing costs (2–5%), and moving expenses.
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A lender will often approve you for more than you should spend. Their question is whether you will repay the loan; yours is whether you can still save, travel, and absorb a $6,000 repair afterward.
Translate income into a realistic price range with the mortgage calculator before you get attached to a listing.
The 28/36 rule
Two ratios, both based on gross monthly income. The first limits housing; the second limits total debt.
- 1
Calculate gross monthly income (before taxes).
- 2
Multiply by 0.28 — that is your maximum full PITI payment.
- 3
Multiply by 0.36 and subtract existing debt payments — the remainder is another housing cap.
- 4
Use whichever cap is lower.
Cash you need beyond the down payment
Buyers who budget only for the down payment tend to close with an empty emergency fund — right when they own something that breaks.
- Closing costs: 2–5% of the price, so $8,000–$20,000 on a $400,000 home.
- Emergency fund: keep 3–6 months of expenses intact — see how much emergency fund you need.
- Move-in costs: appliances, window coverings, immediate repairs, movers.
- Maintenance reserve: 1–2% of home value per year, starting immediately.
Adjust the rule for your life
The ratios are a starting point. Real circumstances push your number up or down.
- Buy lower if your income is variable, you have childcare costs, or you are behind on retirement.
- You can stretch if you have very low other debt, dual stable incomes, and a large cash cushion.
- High-tax and high-insurance states shrink the house you can buy at the same payment.
- Rising rates cut buying power fast — requote your range if rates move a half point.
Buy below your maximum
Pre-approval is a ceiling. Purposely shopping under it is what separates comfortable owners from house-poor ones.
- 1
Aim for about 80% of your approved amount as your target price.
- 2
Confirm the payment at that price with the mortgage calculator.
- 3
Compare the same price against renting in the rent vs buy calculator.
- 4
Lock your loan only after comparing lenders — see how to compare mortgage loans.
Disclaimer: This page includes AI-assisted educational content reviewed for general accuracy. It is not personalized financial, tax, or legal advice. Verify numbers with a qualified professional and our editorial standards.
Continue reading
Related guides that deepen the same decision.
How to Calculate Your Mortgage Payment (Formula + Examples)
Your monthly principal and interest come from the standard amortization formula — but budget for PITI, which adds property taxes, insurance, and PMI to that number.
ReadReal EstateRent vs Buy: When Does Homeownership Actually Make Sense?
Buying usually wins if you will stay put at least five to seven years and can cover the payment plus maintenance; renting wins for shorter timelines because transaction costs eat any early gains.
ReadReal EstateHow to Compare Mortgage Loans: Beyond the Interest Rate
Collect Loan Estimates from at least three lenders on the same day, then compare APR and total cost over how long you will actually keep the loan — not the advertised rate.
ReadReady to plug in your numbers?
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