How much house can I afford is the first real question of home buying, and the honest answer is almost always lower than the number a lender hands you. Affordability is not the maximum loan you qualify for. It is the monthly payment you can carry without your life getting tight, and the cleanest way to find it is the 28/36 rule applied to your full housing cost, not just principal and interest.
Lenders, big-bank calculators, and listing sites have an incentive to show you the biggest number that still gets approved. This guide does the opposite. It walks the actual math, separates the two ratios that decide your limit, and shows why taxes, insurance, and PMI quietly shrink the price you can target. Run the numbers yourself and you stop relying on anyone else's optimistic estimate.
How Much House Can I Afford Using the 28/36 Rule?#
The 28/36 rule is a guideline lenders and financial planners use to set a safe housing budget. Spend no more than 28% of your gross monthly income on total housing costs, and no more than 36% on all debt payments combined. Those two ceilings, applied to your real numbers, give you a defensible affordability range.
The two percentages exist because there are two different risks. The 28% front-end ratio protects you from a house that is expensive on its own. The 36% back-end ratio protects you from a house that is fine alone but unaffordable once you stack a car loan and student debt on top. You have to pass both, and the lower of the two is your true limit.
Key point: affordability is set by your monthly cash flow, not the sticker price. A $400,000 house and a $400,000 house with high property taxes are two completely different monthly payments.
Front-end ratio (the 28%)#
The front-end ratio is your total monthly housing cost divided by your gross monthly income. Gross means before taxes and deductions, the same figure a lender uses. Multiply your gross monthly income by 0.28 and you get the maximum housing payment the rule allows.
If you earn $6,000 a month gross, your front-end ceiling is $1,680. That number has to cover everything the house costs each month, which is more than just the loan.
Back-end ratio (the 36%)#
The back-end ratio is every monthly debt payment divided by gross monthly income. This includes the future house payment plus car loans, student loans, credit card minimums, personal loans, and child support or alimony. It does not include groceries, utilities, or streaming subscriptions.
Multiply gross monthly income by 0.36 to get your total debt ceiling, then subtract your existing non-housing debt. Whatever is left is the most you can spend on housing under the back-end rule. Often this is the number that actually binds, especially if you carry a car payment.
What Counts as a Housing Payment: PITI, Not Just the Loan#
This is the single biggest mistake first-time buyers make, and the reason so many online estimates run high. Your monthly housing cost is not the mortgage payment from a loan calculator. It is PITI, four costs bundled together.
- Principal: the portion that pays down what you borrowed.
- Interest: the lender's charge on the balance, front-loaded in early years.
- Taxes: property taxes, usually collected monthly into an escrow account.
- Insurance: homeowners insurance, also typically escrowed.
On top of PITI you often pay PMI (private mortgage insurance) if your down payment is under 20%, plus HOA dues if the property has them. Together these extras can add hundreds of dollars a month that a bare principal-and-interest figure completely ignores.
Here is how the pieces compare on a rough $320,000 loan example. Treat these as illustrative ranges, since rates and tax bills vary widely by location.
| Cost component | Typical monthly range | Counts toward 28%? |
|---|---|---|
| Principal + interest | $1,900 to $2,300 | Yes |
| Property taxes | $250 to $600 | Yes |
| Homeowners insurance | $80 to $200 | Yes |
| PMI (if under 20% down) | $100 to $250 | Yes |
| HOA dues (if applicable) | $0 to $400 | Yes |
The takeaway: a loan tool might show a $2,000 payment, but your real housing cost under the 28/36 rule could be $2,600 once taxes, insurance, and PMI land. That difference is exactly why the price you can afford is lower than the price you qualify for. A full mortgage calculator that models PITI is the only way to see the true number. You can model all four components plus PMI in the free Molixa mortgage calculator before you ever talk to a lender.
How to Calculate How Much House You Can Afford#
Work this in order. Each step narrows the range until you land on a realistic target price. Have your gross income and current debt payments ready before you start.
Step 1: Find your gross monthly income#
Add up all reliable income before taxes, then divide annual figures by 12. Include salary, steady bonuses, and any documented self-employment income a lender would count. If you are buying with a partner, combine both incomes since lenders will.
Someone earning $90,000 a year has a gross monthly income of $7,500. That single number drives every ceiling below, so get it right.
Step 2: Apply the 28% front-end ceiling#
Multiply gross monthly income by 0.28. For our $7,500 earner, that is $2,100. This is the most you should spend on total PITI plus PMI and HOA, before considering any other debt.
If you have no other debt at all, this is likely your binding limit. Most people do have other debt, so continue to the back-end check.
Step 3: Apply the 36% back-end ceiling#
Multiply gross monthly income by 0.36, then subtract existing monthly debt. Our earner gets $7,500 times 0.36, which is $2,700. Suppose they have a $450 car payment and $250 in student loans, totaling $700.
That leaves $2,700 minus $700, or $2,000 available for housing under the back-end rule. Notice this is lower than the $2,100 front-end ceiling, so $2,000 is the real budget.
Step 4: Subtract taxes, insurance, and PMI to find your loan payment#
Your $2,000 housing budget has to cover all of PITI, not just principal and interest. Estimate taxes, insurance, and PMI for the area you are shopping. If those add up to roughly $500 a month, only $1,500 is left for principal and interest.
This is the figure that maps to an actual loan amount, and it is dramatically lower than the naive approach of treating the whole $2,000 as a loan payment.
Step 5: Convert the payment into a price#
Use the remaining principal-and-interest figure, the current interest rate, and your planned down payment to back into a home price. A $1,500 principal-and-interest budget supports very different loan sizes at 5% versus 7%, which is why rate matters so much.
Rather than do the amortization by hand, drop your numbers into the home loan affordability calculator and adjust the rate and down payment sliders until the payment matches your budget. The price it lands on is your target.
What Salary Do I Need for a 400k House?#
This is the most common reverse question, so let us run it. A $400,000 house affordability estimate depends on down payment, rate, and your other debt, but the 28/36 rule gives a clean baseline.
Assume 10% down ($40,000), a $360,000 loan, a roughly 6.5% rate, and taxes plus insurance and PMI around $650 a month. Total PITI lands near $2,900 a month. To keep that under 28%, you need gross monthly income of about $10,360, or roughly $124,000 a year, with little to no other debt.
Add a $500 car payment and the back-end ratio becomes the constraint. Now you need closer to $9,440 a month just to stay under 36% for total debt, which pushes the comfortable salary higher still. Small changes ripple hard:
- Bigger down payment removes PMI and shrinks the loan, lowering the salary needed.
- Higher rate raises the interest portion, so the same salary buys less house.
- Existing debt eats your back-end room directly, dollar for dollar.
The pattern holds at every price point. To see the salary for any target home, you can also sanity-check your income side with the salary and take-home calculator and then feed the gross figure back into the affordability math.
Why the Lender's Number Runs High#
Lenders frequently approve buyers up to a 43% or even higher back-end ratio, well above the 36% guideline. Approval is not the same as affordability. The lender is measuring whether you will probably keep paying, not whether you will have a comfortable life.
Three things the maximum approval ignores:
- Retirement and savings: a payment that passes DTI can still leave nothing for a 401(k) or emergency fund.
- Lifestyle and variable costs: childcare, medical bills, and car repairs do not appear in the ratio.
- Maintenance: owners typically budget 1% to 2% of the home value per year for upkeep, separate from PITI.
Warning: borrowing to your approval ceiling is how people become house poor, technically able to make the payment while having no room for anything else. Target the lower end of your 28/36 range, not the lender's max.
Closing costs and the cash you need up front#
Affordability is not only monthly. You also need cash to close, generally 2% to 5% of the loan amount, covering appraisal, title, origination, and prepaid escrow. On a $360,000 loan that is roughly $7,200 to $18,000 on top of your down payment.
Plan for the down payment, closing costs, and a few months of reserves before you commit. A house you can afford monthly but cannot fund at closing is still out of reach.
How to Stretch Your Affordability Honestly#
You cannot change the math, but you can change the inputs. These move the needle without faking your way into a payment you cannot handle.
- Pay down a debt before applying. Clearing a car loan frees up back-end room immediately and can raise your housing budget by hundreds a month.
- Save to 20% down. Crossing that threshold drops PMI entirely, redirecting that cash straight into principal and interest.
- Buy where taxes are lower. Two identical houses in different counties can differ by $300 a month in property tax, which is real affordability.
- Lock a better rate. Improving your credit score before applying can shave the rate, and even half a point meaningfully changes the price you can target.
Run each scenario through a free mortgage calculator so you see the dollar impact instead of guessing. Small disciplined moves before you shop beat hoping the market cooperates after you buy.
Conclusion: Know Your Real Number Before You Shop#
How much house can I afford comes down to passing both the 28% front-end and 36% back-end ratios, then sizing the loan from your full PITI rather than a bare principal-and-interest payment. The 28/36 rule, applied honestly with taxes, insurance, and PMI included, gives you a budget you can actually live with.
Do this math before you fall in love with a listing, not after. Use the lower of your two ratios as the ceiling, leave room for savings and maintenance, and treat the lender's maximum as a warning sign rather than a goal. Model it once with a transparent calculator and you walk into the search with a number that is yours, not a sales figure.
Frequently Asked Questions#
What is the 28/36 rule for buying a house? The 28/36 rule says you should spend no more than 28% of gross monthly income on total housing costs (PITI) and no more than 36% on all monthly debt payments combined. You have to satisfy both ceilings, and the lower of the two sets your real housing budget. It is a guideline used by lenders and planners to keep payments sustainable.
Does the 28% include property taxes and insurance? Yes. The 28% front-end ratio applies to your full housing payment, known as PITI: principal, interest, taxes, and insurance, plus PMI and HOA dues if they apply. This is why a payment from a basic loan calculator understates your real housing cost. Always include taxes and insurance when you check the ratio.
How much income do I need to afford a $300,000 house? With about 10% down, a roughly 6.5% rate, and standard taxes and insurance, total PITI on a $300,000 home often lands near $2,200 a month. To keep that under the 28% ceiling you need gross monthly income around $7,850, or roughly $94,000 a year, assuming little other debt. Existing loans push that figure higher because they eat your back-end room.
Should I borrow the maximum amount the lender approves? No. Lenders often approve back-end ratios of 43% or more, which leaves little for retirement savings, emergencies, or home maintenance. Approval measures whether you will keep paying, not whether the payment is comfortable. Target the lower end of your 28/36 range to avoid becoming house poor.
How does my down payment change how much house I can afford? A larger down payment shrinks the loan and, once you reach 20%, eliminates PMI entirely, which frees up monthly budget for principal and interest. That means the same income can support a higher price. A smaller down payment adds PMI and a bigger balance, lowering the home price you can target under the same ratios.
What is the difference between front-end and back-end DTI? Front-end DTI counts only your housing payment against gross income, capped at 28%. Back-end DTI counts your housing payment plus every other monthly debt (car loans, student loans, credit cards), capped at 36%. The back-end ratio is usually the binding constraint for buyers who carry other debt, since each existing payment directly reduces what is left for housing.
