The Complete Guide to How Much House You Can Afford
By Arshi Khan, Founder of Just4Marketing · Last reviewed October 2026
Before you look at listings, it helps to know the price range a lender is likely to approve and that you can comfortably carry. This guide explains how home affordability is worked out from your income, debts and down payment, why the full monthly payment matters more than the loan alone, and how interest rates and down payments change the answer.
How the calculation works
The calculator first works out the most you can spend on housing each month. It takes the lower of two limits: your housing limit (28% of gross monthly income by default) and your total debt limit (36%) minus the debt payments you already make.
It then finds the highest home price whose full monthly payment fits that budget. The payment includes principal and interest on the loan (price minus down payment), property tax as a percentage of the price, home insurance, HOA fees and — when your down payment is under 20% of the price — PMI.
A worked example
Take a household earning $96,000 a year ($8,000 a month) with $500 a month of car and student loan payments, $75,000 saved for a down payment, a 30-year mortgage at 6.5%, property tax of 1.1% a year and $1,500 a year of home insurance.
| Step | Result |
|---|---|
| Housing limit: 28% of $8,000 | $2,240 a month |
| Total debt limit: 36% of $8,000 − $500 | $2,380 a month |
| Monthly budget (the lower of the two) | $2,240 |
| Home price that fits the budget | About $357,700 |
| Loan ($357,700 − $75,000) | About $282,700 |
| Principal & interest / property tax / insurance | $1,787 / $328 / $125 |
The $75,000 down payment is 21% of the price, so no PMI applies. With only $30,000 down, the same budget supports about $302,700, because PMI of around $114 a month takes part of the budget and the loan is larger.
How the interest rate changes your budget
| Rate (30-year) | Home price for a $2,240 payment ($75,000 down) |
|---|---|
| 6.0% | About $371,000 |
| 6.5% | About $357,700 |
| 7.0% | About $345,300 |
| 7.5% | About $333,700 |
Each half point of interest moves the price by about $12,000–$13,000 here. A shorter term costs buying power too: on a 15-year loan at the same rate, the price drops to about $287,500, although you pay far less interest overall.
How the down payment changes your budget
| Down payment | Home price | Down payment share |
|---|---|---|
| $20,000 | About $293,900 | 6.8% (PMI applies) |
| $40,000 | About $311,500 | 12.8% (PMI applies) |
| $75,000 | About $357,700 | 21.0% |
| $100,000 | About $379,600 | 26.3% |
Ways to afford more house
Clear a small debt
If the total debt limit is the one holding you back, paying off a $300-a-month loan raises your housing budget by the full $300.
Reach 20% down
Removing PMI lets the whole budget go toward the loan, taxes and insurance.
Compare rates and improve your credit
A lower rate is one of the biggest levers — half a point is worth around $12,000 of price in the example above.
Use local tax and insurance figures
Property tax rates vary a lot between areas, and a high-tax area can lower your budget by tens of thousands.
Frequently asked questions
How much house can I afford on my salary?
A common guideline is that your full housing payment — principal, interest, property tax, insurance, HOA and any PMI — should be no more than 28% of your gross monthly income, and all your debt payments together no more than 36%. On a $96,000 salary with $500 of other debt, 6.5% interest and $75,000 down, that works out to a home price of about $358,000.
What is the 28/36 rule?
It's a long-standing lending guideline: spend no more than 28% of gross monthly income on housing (the front-end ratio) and no more than 36% on all debts including housing (the back-end ratio). Your budget is whichever limit is lower. Many lenders allow higher ratios, often up to 43% back-end or more for some loan programs.
Does the down payment change how much house I can afford?
Yes, twice over. Every extra dollar down is a dollar you don't borrow, and putting down 20% or more usually removes private mortgage insurance (PMI), which frees up more of your monthly budget for the loan itself.
Should I buy at the maximum I'm approved for?
Not necessarily. Approval limits are based on gross income and don't account for childcare, savings goals, commuting or repairs. Many buyers aim below the maximum so the payment still feels comfortable if costs rise. This calculator shows a stretch price at 43% for comparison, not as a target.
What costs does this calculator leave out?
Closing costs (often 2%–5% of the price), moving costs, maintenance and utilities aren't part of the monthly payment it solves for. Set aside cash for closing costs separately, and keep an emergency fund after buying.