How much house can I afford?

A common guideline is the 28/36 rule: your monthly mortgage payment should not exceed 28% of your gross monthly income, and total monthly debt payments should not exceed 36% of gross income. Most lenders cap the debt-to-income (DTI) ratio at 43-45% for mortgage approval.

What is the 28/36 rule for mortgages?

The 28/36 rule states that no more than 28% of your gross monthly income should go toward housing costs (PITI - principal, interest, taxes, insurance), and no more than 36% should go toward all debt payments combined including housing, car loans, student loans, and credit cards.

How much do I need for a down payment?

The minimum down payment is 3-3.5% for FHA loans and some conventional loans, but 20% is ideal to avoid Private Mortgage Insurance (PMI). PMI typically costs 0.5-1.5% of the loan amount annually until you reach 20% equity.

🏡 Housing & Real Estate

Home Affordability Calculator

Find the maximum home price you can afford based on your income, existing debts, down payment, and mortgage rate. Includes DTI analysis and three affordability scenarios. Free, no signup.

How Much House Can You Afford?

Annual Gross Income ($)

Co-Borrower Income ($/yr)

Down Payment ($)

Mortgage Rate (%)

Loan Term

Monthly Debts (car, student, etc. $)

Property Tax Rate (%/yr)

Home Insurance ($/yr)

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maximum home price (conservative 28% rule)

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Conservative

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28% of income

Moderate

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33% of income

Aggressive

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43% DTI max

Your Debt-to-Income (DTI) breakdown:

Housing (PITI)

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Other debts

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Total DTI

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Lenders typically approve up to 43% total DTI. Under 36% is preferred.

Monthly payment breakdown (at conservative price):

Principal & Interest—

Property Tax—

Home Insurance—

PMI (if <20% down)—

Total Monthly PITI—

How Home Affordability Is Calculated

Lenders use debt-to-income (DTI) ratios to determine how much you can borrow. The two key ratios:

Front-end DTI (housing ratio): Monthly PITI ÷ Gross Monthly Income ≤ 28% Back-end DTI (total debt ratio): (Monthly PITI + All Debts) ÷ Gross Monthly Income ≤ 36–43% PITI = Principal + Interest + Taxes + Insurance

What lenders actually approve

Conventional loans: DTI up to 45–50% with strong credit (760+) and large reserves
FHA loans: DTI up to 57% with compensating factors
VA loans (veterans): No official DTI limit but 41% is guideline
The 28% rule: Conservative but results in comfortable payments. Most financial advisors prefer this.

Just because a lender will approve you for the maximum doesn't mean you should borrow it. Lender maximums don't account for retirement savings, college funds, emergencies, or the actual cost of living in your area.

Frequently Asked Questions

What credit score do I need to buy a house?

Minimum credit scores: FHA loan = 500 (10% down) or 580 (3.5% down). Conventional loan = 620 minimum, but rates improve significantly at 740+. VA loan = no official minimum but most lenders require 620. A score above 760 gets you the best rates — the difference between 620 and 760 can mean 0.5–1% higher interest rate, costing tens of thousands over the loan term.

What is PMI and how do I avoid it?

Private Mortgage Insurance (PMI) is required on conventional loans when your down payment is less than 20%. It costs 0.5–1.5% of the loan amount annually — on a $350,000 loan, that's $1,750–$5,250/year. Avoid it by: putting 20% down, using a piggyback loan (80/10/10), or choosing a lender-paid PMI program (higher rate but no PMI). PMI automatically cancels when you reach 20% equity.

How much cash do I need beyond the down payment?

Closing costs typically run 2–5% of the purchase price. On a $350,000 home, that's $7,000–$17,500. Plus, most lenders want to see 2–6 months of mortgage payments in reserve after closing. Budget for the down payment + closing costs + 3 months reserves at minimum before house hunting.