Home Affordability Calculator: How Much House Can You Afford?
Quick Answer
- *The 28/36 rule: housing costs ≤28% of gross monthly income; total debt ≤36%.
- *A common starting point is 2.5–3× your annual income — but DTI, down payment, and current rates all shift that number.
- *At 7% rates, the same monthly payment that bought a $350K home at 3% buys only about $250K today.
- *True monthly cost = principal + interest + taxes + insurance + HOA + PMI (if applicable).
The 28/36 Rule: The Foundation of Home Affordability
The 28/36 rule is the most widely cited guideline in home affordability. It comes from decades of mortgage underwriting practice and sets two hard-to-exceed thresholds.
- Front-end limit (28%): Your monthly PITI — principal, interest, property taxes, and homeowners insurance — should not exceed 28% of your gross monthly income.
- Back-end limit (36%): All monthly debt payments combined — your mortgage plus car loans, student loans, and credit card minimums — should not exceed 36% of gross monthly income.
For a household earning $90,000/year ($7,500/month gross), those thresholds translate to a maximum housing payment of $2,100/month and a total debt ceiling of $2,700/month.
How Lenders Actually Calculate Affordability
Lenders look at two DTI ratios when underwriting a mortgage.
The front-end DTI (housing ratio) divides your monthly housing costs by gross monthly income. Most conventional lenders cap this at 28%. The back-end DTI divides all monthly debt payments by gross monthly income. For a qualified mortgage under CFPB guidelines, the standard cap is 43%. FHA loans allow up to 50% with compensating factors such as a high credit score or substantial cash reserves.
Getting pre-approved is not the same as buying what you can comfortably afford. Lenders approve you up to a maximum — that maximum is not a budget recommendation.
Home Price Multiple: Income-Based Rule of Thumb
A simpler starting point is the home price multiple: target a home priced at 2.5 to 3 times your gross annual income. This rough estimate assumes moderate debt levels, a reasonable down payment, and mid-range mortgage rates.
| Annual Income | 2.5× Estimate | 3× Estimate |
|---|---|---|
| $75,000 | $187,500 | $225,000 |
| $100,000 | $250,000 | $300,000 |
| $150,000 | $375,000 | $450,000 |
| $200,000 | $500,000 | $600,000 |
These are starting points only. High-cost cities, heavy student debt, or a thin down payment can push your realistic budget well below the 3× figure. Low debt and a large down payment can push it slightly above.
Down Payment Impact on Monthly Payment
Down payment size affects your loan balance, monthly payment, and whether you owe PMI. Here is what different down payment levels look like on a $350,000 home at a 7% interest rate on a 30-year term.
| Down Payment | Amount Down | Loan Amount | Monthly P&I | PMI Required? |
|---|---|---|---|---|
| 3.5% (FHA) | $12,250 | $337,750 | $2,248 | Yes (∼$140/mo) |
| 5% | $17,500 | $332,500 | $2,213 | Yes (∼$138/mo) |
| 10% | $35,000 | $315,000 | $2,096 | Yes (∼$131/mo) |
| 20% | $70,000 | $280,000 | $1,863 | No |
Putting 20% down saves approximately $385/month versus 3.5% down (including eliminated PMI) — more than $138,000 over 30 years when you account for interest savings on the lower balance.
True Monthly Cost Breakdown
Most buyers underestimate the total monthly carrying cost of homeownership. The full picture includes:
- Principal & interest: The core mortgage payment calculated by your loan amount, rate, and term.
- Property taxes: Varies enormously by location. The national average effective rate is about 1.1% annually (Tax Foundation, 2024), meaning $3,850/year or $321/month on a $350,000 home.
- Homeowners insurance: Averages $1,200–$2,400/year nationally, or $100–$200/month.
- HOA fees: Range from $0 to $500+/month depending on the community.
- PMI: Typically 0.5–1.5% of the loan amount annually if your down payment is below 20%.
Worked Example: $90,000 Income Household
A household earning $90,000/year ($7,500/month gross) considers a $320,000 home with 5% down ($16,000) at a 7% interest rate.
- Loan amount: $304,000
- Monthly principal & interest: $2,023
- Property taxes (1.1% rate): $293/month
- Homeowners insurance: $130/month
- PMI (0.6% on $304,000): $152/month
- Total PITI: $2,598/month
That PITI of $2,598 represents 34.6% of gross monthly income — above the 28% front-end guideline. If this household also carries a $400/month car payment and $300/month in student loan payments, back-end DTI hits 44%, which clears the 43% CFPB threshold only marginally with compensating factors. This is exactly why running the full numbers matters before house hunting.
Home Price-to-Income Ratios by City
The national affordability picture varies dramatically by market. According to NAR data, price-to-income ratios in 2025 span from extreme in coastal metros to manageable in the Midwest.
| Metro Area | Price-to-Income Ratio | Affordability |
|---|---|---|
| San Jose, CA | ∼11× | Severely unaffordable |
| San Francisco, CA | ∼10× | Severely unaffordable |
| Los Angeles, CA | ∼9× | Severely unaffordable |
| Miami, FL | ∼7× | Very unaffordable |
| New York, NY | ∼6× | Unaffordable |
| Chicago, IL | ∼4× | Moderately affordable |
| Cleveland, OH | ∼3× | Affordable |
| Indianapolis, IN | ∼3× | Affordable |
Harvard's Joint Center for Housing Studies reported in its 2024 State of the Nation's Housing report that cost-burdened households (spending more than 30% of income on housing) reached record highs, with over 22 million renter households and a growing share of homeowners in that category.
How Rising Rates Erode Buying Power
Interest rate changes have an outsized impact on what you can actually buy. The math is stark.
| Rate | Monthly P&I Budget of $1,800 | Supportable Loan Amount |
|---|---|---|
| 3.0% | $1,800 | ∼$427,000 |
| 5.0% | $1,800 | ∼$335,000 |
| 6.0% | $1,800 | ∼$300,000 |
| 7.0% | $1,800 | ∼$271,000 |
| 8.0% | $1,800 | ∼$246,000 |
From the 3% rate environment of 2021 to the 7% environment of 2026, the same $1,800/month P&I budget lost more than $156,000 in purchasing power. That shift explains much of the current affordability crisis.
Mortgage Stress Testing
Conservative lenders and financial planners often apply a stress test: qualify your budget as if the rate were 2% higher than your actual rate. If you are borrowing at 7%, stress-test at 9%. This matters for adjustable-rate mortgages (ARMs) and variable-rate products where rates can rise after the initial fixed period.
Canada formally requires a stress test at the higher of the contract rate plus 2% or 5.25% for all insured mortgages. US buyers using ARMs should run the same math voluntarily. A 5/1 ARM at 6% could reset to 8% or higher after year five — your budget needs to accommodate that possibility.
Run your numbers with the full cost breakdown
Use our free Home Affordability Calculator →Also see our Mortgage Calculator Guide and DTI Ratio Guide
Frequently Asked Questions
How much house can I afford with my salary?
A common rule of thumb is 2.5 to 3 times your annual gross income. On a $75,000 salary, that suggests a home in the $187,500–$225,000 range. On $100,000, roughly $250,000–$300,000. But income alone does not tell the full story. Lenders also weigh your existing debts, down payment, credit score, and local property taxes. Use a home affordability calculator to factor in all variables, since two households with the same income but different debt loads can qualify for very different amounts.
What is the 28/36 rule for home affordability?
The 28/36 rule sets two limits for housing debt. The “28” means your monthly housing costs — principal, interest, property taxes, and insurance (PITI) — should not exceed 28% of your gross monthly income. The “36” means your total monthly debts, including the mortgage plus car payments, student loans, and credit card minimums, should not exceed 36% of gross monthly income. Many conventional lenders use this as a starting benchmark, though modern underwriting can allow higher ratios with strong compensating factors.
How does the down payment affect home affordability?
A larger down payment reduces your loan balance, lowers your monthly payment, and eliminates PMI once you reach 20%. On a $350,000 home, putting 20% down instead of 3.5% saves roughly $385/month when you include the eliminated PMI cost. Over 30 years, the combined effect of lower principal and eliminated PMI can save more than $130,000. A larger down payment also improves your DTI ratio, which can unlock better loan terms.
What is a front-end vs back-end DTI ratio?
Front-end DTI (the housing ratio) measures only your monthly housing costs divided by gross monthly income. Lenders typically cap this at 28%. Back-end DTI measures all monthly debt payments divided by gross monthly income. CFPB qualified mortgage guidelines cap back-end DTI at 43% for conventional loans. FHA loans allow up to 50% with compensating factors. Both ratios matter: a buyer with low housing costs but heavy student and car debt can still be denied if the back-end DTI is too high.
How do interest rates affect how much home I can afford?
Interest rates have an outsized impact on buying power. At 3%, a $1,800/month P&I budget supports a loan of about $427,000. At 7%, the same $1,800/month only supports roughly $271,000 — a difference of $156,000 in purchasing power for the exact same monthly outlay. The shift from near-historic-low rates in 2021 to the 6.5–7% range in 2026 cut purchasing power by 30–35% for typical buyers, which explains much of the current housing affordability crisis.