How Much House Can I Afford?

The 28/36 Rule Explained

The most widely used guideline for home affordability is the 28/36 rule. Here’s what it means:

• 28% (Front-End Ratio): Your total monthly housing costs (mortgage, taxes, insurance, HOA) should not exceed 28% of your gross monthly income.
• 36% (Back-End Ratio): Your total monthly debt payments (housing + car loans + student loans + credit cards) should not exceed 36% of your gross monthly income.

A Real-World Example

If your household earns $85,000 per year ($7,083/month gross):

• Maximum housing payment (28%): $1,983/month
• Maximum total debts (36%): $2,550/month
• If you have $500/month in other debts, your housing is capped at $2,050/month

At 6.5% interest with 20% down, that supports roughly a $340,000–$380,000 home price.

What Lenders Actually Look At

Beyond the 28/36 rule, lenders consider:

• Credit score: Higher scores get better rates and higher approval limits.
• Employment history: Stable income over 2+ years is preferred.
• Down payment: 20% avoids PMI; 3.5% is the FHA minimum.
• Reserves: Money left after closing (2–6 months of payments preferred).

Comfortable vs. Maximum

Just because you qualify for a certain amount does not mean you should borrow that much. A comfortable budget leaves room for:

• Emergency fund (3–6 months of expenses)
• Home maintenance (1% of home value per year)
• Savings goals (retirement, education, travel)

Use our Mortgage Affordability Calculator to find your comfortable range.