The house price a lender approves and the payment you're comfortable with are two different numbers. Understanding how affordability is calculated helps you shop in the right range and avoid becoming "house poor."
The 28/36 rule explained
Lenders lean heavily on two ratios. The first says your monthly housing cost — principal, interest, taxes, and insurance — should stay under about 28% of your gross monthly income. The second says all your monthly debt payments combined (housing plus car loans, student loans, and credit cards) should stay under about 36%. These aren't hard laws, but they're the backbone of how affordability is judged.
You can check where you stand with our debt-to-income calculator, which shows your ratios and how much room you have for a housing payment.
What actually sets your budget
Four things move the price you can afford more than anything else:
- Income — higher gross income raises both the 28% and 36% ceilings.
- Existing debt — every other monthly payment eats into your 36% total.
- Down payment — a bigger down payment means a smaller loan and lower monthly cost.
- Interest rate — even a small rate change noticeably shifts the monthly payment.
Once you have a target price, our mortgage calculator turns it into a monthly payment, and the down payment calculator shows how different down payments change the loan.
Don't forget the extra costs
| Cost | What it covers |
|---|---|
| Property taxes | Annual tax based on home value; varies widely by area |
| Home insurance | Required by lenders; protects the property |
| PMI | Often required with less than 20% down |
| Maintenance | Budget roughly 1% of home value per year |
Put the numbers together
Start with your income and debts in the DTI calculator to find your comfortable payment, then work backward with the mortgage calculator to the price and down payment that fit. Shopping with those numbers in hand keeps you focused on homes you can genuinely afford.
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Frequently Asked Questions
How much house can I afford on my salary?
A common guideline is the 28/36 rule: keep housing costs under about 28% of gross monthly income and total debt under 36%. Your down payment and rate then set the price.
What is the 28/36 rule?
It's a lending guideline that suggests spending no more than 28% of gross monthly income on housing and no more than 36% on total monthly debt payments.
How does a down payment affect affordability?
A larger down payment reduces the loan amount and monthly payment, and putting down 20% typically avoids private mortgage insurance, freeing up more of your budget.
Should I borrow the maximum a lender approves?
Not necessarily — lenders approve the most the ratios allow, but leaving room for savings, emergencies, and maintenance is what keeps a home affordable over time.