Guide
"How much house can I afford?" is the first question of every home purchase — and the answer is rarely the biggest number a lender will approve. Lenders use a well-known guideline called the 28/36 rule to decide how much they'll lend, and understanding it helps you find a payment you can comfortably live with, not just barely qualify for.
The rule sets two limits based on your gross monthly income (income before taxes):
Suppose you earn $90,000 a year, or $7,500 a month gross.
| Limit | Calculation | Monthly cap |
|---|---|---|
| 28% housing | $7,500 × 0.28 | $2,100 |
| 36% total debt | $7,500 × 0.36 | $2,700 |
If you already pay $500/month toward a car and student loans, the 36% cap leaves $2,200 for housing — but the 28% cap still holds you to $2,100. Lenders apply whichever limit is lower, so your housing budget here is about $2,100/month.
Knowing your $2,100 housing cap is only half the answer — you still have to translate that into a purchase price, and taxes and insurance eat into it. Say your local property tax runs about 1.2% of value per year and homeowner's insurance is roughly $150 a month. On a home priced around $310,000 with a 10% down payment, property taxes alone add about $310 a month, and insurance another $150. That leaves roughly $1,640 of your $2,100 cap for principal and interest — which, at typical rates, supports a loan smaller than the sticker price suggests. This is exactly why plugging real tax and insurance numbers into a calculator gives a very different answer than a quick "income times three" estimate.
A mortgage payment is more than principal and interest. Lenders look at PITI — Principal, Interest, Taxes, and Insurance — plus HOA and, if your down payment is under 20%, private mortgage insurance (PMI). Two homes at the same price can have very different payments depending on local property tax rates and insurance costs. A condo with a $400/month HOA fee, for instance, effectively shrinks your borrowing power by the amount of that fee, because it counts inside your 28% housing cap. Always budget the full PITI (plus HOA and PMI), not just the loan payment.
The ratios depend on definitions that trip up a lot of first-time buyers. On the income side, lenders generally use stable, documentable gross income — base pay, and often a two-year average of bonuses, commissions, or self-employment earnings. On the debt side, they count the minimum monthly payments that appear on your credit report: car loans, student loans (even deferred ones, using an estimated payment), and minimum credit card payments. The Consumer Financial Protection Bureau explains that this back-end figure — total monthly debt divided by gross monthly income — is exactly the debt-to-income ratio lenders lean on most. They usually do not count expenses like utilities, groceries, or streaming subscriptions — which is why the rule is a floor for safety, not a full budget. Your own comfortable number may be lower than what the ratios allow.
Lenders will sometimes approve you above these ratios, especially with strong credit or reserves. But the 28/36 rule exists to protect you from becoming "house poor." Leave room for maintenance (budget 1–2% of the home's value per year), higher utilities than renting, and life's surprises. Paying down a car loan or a credit card before you apply can meaningfully raise your price range, because every $100 of monthly debt you remove frees up room under the 36% cap. The CFPB offers unbiased guidance on figuring out how much you want to spend, including worksheets that separate the payment a lender will approve from the one that fits your life.
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Your affordability isn't fixed — it moves with interest rates. Because higher rates raise the interest portion of every payment, a rate increase shrinks the loan your budget supports even though your income hasn't changed. As a rough rule of thumb, each one-percentage-point rise in mortgage rates cuts your purchasing power by roughly 10%. On a $2,100 housing budget, moving from a 6% rate to a 7% rate can lower the home price you can afford by tens of thousands of dollars. For context, Freddie Mac's Primary Mortgage Market Survey put the average 30-year fixed rate at about 6.5% in mid-2026 — but rates move weekly, so use a current quote rather than a rule of thumb when you're ready to buy. This is why it pays to get quotes when you're actually ready to buy, and to lock a rate once you're under contract if you expect rates to rise.
The ratios describe today, but you'll own the home for years. Before committing, run a few "what if" checks: What happens to the payment if property taxes are reassessed higher, or insurance premiums climb? Could you still cover the payment if one income in the household paused for a few months? Would an adjustable-rate loan's payment still fit if the rate reset upward? Building in a cushion — buying somewhat below your maximum — is what separates a comfortable purchase from a stressful one. A good target is to keep total housing costs comfortably under the 28% cap and to hold three to six months of expenses in reserve after closing.
The affordability calculator applies the 28/36 rule to your income, debts, down payment, and local tax and insurance estimates to show a realistic price range in seconds.
Is the 28/36 rule a hard limit? No. It's a widely used guideline, not a law. Many loan programs approve borrowers with back-end ratios above 36% — sometimes into the mid-40s — when there are compensating factors like a large down payment, strong credit, or cash reserves. Treat 28/36 as a sensible target for staying comfortable, not the maximum you're allowed.
Does a bigger down payment let me afford more house? Often, yes. A larger down payment shrinks the loan (lowering the monthly principal and interest) and, once you cross 20%, removes PMI — both of which free up room under your 28% housing cap. It also reduces total interest over the life of the loan. Just don't drain your reserves to do it.
Should I use gross or net income for the rule? The 28/36 rule uses gross monthly income — your pay before taxes and deductions. Because your take-home pay is lower, it's smart to sanity-check the payment against your net income too, so the number still feels livable after taxes come out.
→ Calculate your home budget with the 28/36 rule