“How much house can I afford?” is really two questions: how much a lender will let you borrow, and how much you can comfortably repay. The classic starting point is the 28/36 rule. Here is how it works and how to turn it into a price.
Once you have a target, estimate the payment and full schedule with our mortgage payment & amortization calculator.
The 28/36 rule
This widely used guideline sets two ceilings based on your gross (pre-tax) monthly income:
- 28% — front-end ratio: your total housing payment (principal, interest, property tax, homeowners insurance, and HOA if any) should stay under 28% of gross monthly income.
- 36% — back-end ratio: all your monthly debt payments — housing plus car loans, student loans and credit-card minimums — should stay under 36%.
The back-end number is your debt-to-income (DTI) ratio, and it is the figure lenders scrutinize most.
A worked example
Suppose your household earns $8,000/month before tax and you have $400/month in other debt payments.
| Limit | Calculation | Monthly cap |
|---|---|---|
| Housing (28%) | 0.28 × $8,000 | $2,240 |
| Total debt (36%) | 0.36 × $8,000 | $2,880 |
| Room for housing after other debt | $2,880 − $400 | $2,480 |
The binding limit is the lower of the two housing figures — here $2,240/month for housing.
Now translate that into a price. Assume $420/month of the budget goes to property tax and insurance, leaving about $1,820 for principal and interest. At 6.5% over 30 years, $1,820/month supports a loan of roughly $288,000. Add a $60,000 down payment and you are looking at a home around $348,000.
Illustrative; rounded. Run your exact numbers in the mortgage calculator.
What moves the number
Four levers change how much house you can afford:
- Income — higher gross income raises both ceilings.
- Existing debt — every $100/month of other debt directly reduces your housing budget under the 36% cap. Paying it down first (see snowball vs avalanche) can unlock more.
- Down payment — a larger one shrinks the loan and can remove PMI.
- Interest rate — a higher rate raises the payment, lowering the affordable price. This is why affordability swings with the market.
Lender limits vs. comfort
The 28/36 rule is conservative; some loan programs approve higher DTIs (43% or more) with strong credit, reserves or a large down payment. But maximum approval is not the same as comfortable. Build in room for:
- Maintenance and repairs (budget ~1% of the home’s value per year).
- Utilities, which often rise when you move from renting.
- An emergency fund, so a surprise expense does not threaten the mortgage.
A quick checklist before you shop
- Calculate your gross monthly income and current debt payments.
- Apply the 28% and 36% caps; take the lower housing figure.
- Subtract a realistic tax + insurance estimate to find your principal-and-interest budget.
- Convert that to a price at today’s rate, then sanity-check it against your real lifestyle costs.
Key takeaways
- The 28/36 rule caps housing at 28% and total debt at 36% of gross income.
- Your DTI is what lenders weigh most; lowering other debt raises your budget.
- Down payment and interest rate strongly affect the price you can afford.
- Borrow for comfort, not for the maximum a lender will allow.
When you have a price in mind, learn how mortgage amortization works so you know how much of each payment builds equity.
This article is general education, not financial advice. Affordability depends on your full financial picture; consult a qualified professional.