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How Much House Can I Afford?
The question every buyer asks first — and the answer is a monthly budget, not a feeling. Here is how lenders work it out, and how to work it out for yourself.
The 28/36 rule, in plain words
Lenders use a first check called the 28/36 rule. Housing should cost no more than 28% of your gross monthly income, and housing plus all other debts should cost no more than 36%. Gross means before tax. Housing means the full monthly payment: principal and interest, property taxes, homeowners insurance, PMI and HOA dues.
On $80,000 a year, gross monthly income is $6,666.67. 28% of that is $1,866.67. 36% is $2,400.00, and with $400 a month of other debts that leaves $2,000.00. The housing budget is the smaller of the two, $1,866.67 a month. That is the number the home affordability calculator starts from.
From a monthly budget to a home price
A monthly budget is not a home price, so the calculator works backwards. It takes the housing budget, takes off taxes and insurance, and works out the biggest loan the amount left can pay for at the rate and term you enter. Then it adds the down payment.
On the $80,000 example, with a 6.5% example rate over 30 years, a 1.1% property tax rate and $1,800 a year of insurance, the budget of $1,866.67 a month buys a $259,492.69 home with a $219,492.69 loan and a $40,000 down payment. The monthly split is principal and interest $1,387.34, taxes $237.87, insurance $150.00 and PMI $91.46. On $100,000 a year with no debts and $60,000 down, the same method gives a $338,067.62 home.
What raises the number
Three things raise how much house you can afford: more income, less debt, and a bigger down payment. Paying off a $400-a-month car loan before you buy raises the budget under the 36% part of the rule. Saving a bigger down payment raises the home price dollar for dollar and can cut PMI as well. A lower rate raises it too — but the rate is not in your control, so it is the least useful lever to count on.
What the rule misses
The 28/36 rule is a first check, not a full budget. It does not count childcare, food, transport, savings or the cost of keeping a house — repairs, maintenance, higher utility bills. A home you can afford on the rule can still feel tight if the rest of your spending is high. Run the calculator, then check the monthly payment against your real spending before you make an offer.
If the answer is less than you hoped
Most buyers find the number smaller than the homes they have been looking at. The options are to save a bigger down payment, pay a debt off first, look at a lower price, or wait. What does not help is stretching the term to 40 years or taking a loan with a low first-year rate that jumps later — both make the home cost more in the end.
Frequently asked questions
How much house can I afford on $80,000 a year?
With $400 a month of debts and $40,000 down, the worked example on this site comes to a $259,492.69 home at a 6.5% example rate over 30 years. With no debts it would be more — run your own numbers on the home affordability calculator.
How much house can I afford on $60,000 a year?
Less than on $80,000, and the debts matter more at that income. Put your income, debts and down payment into the home affordability calculator — a single number without your debts would mislead you.
Should I spend the maximum I can afford?
Usually not. The maximum leaves no room for repairs, rate changes on other debts, or a drop in income. Most buyers are happier a little below the maximum, with cash left over.
Sources and method. Standard amortization formula: monthly rate r = annual rate / 12, n = years × 12, payment M = P × r × (1+r)n / ((1+r)n − 1). PMI usually ends when the loan balance reaches 80% of the home value (Consumer Financial Protection Bureau guidance). Affordability uses the 28/36 rule of thumb used by many lenders. Rates in examples are examples only, not live market rates. Results are estimates, not financial advice.
Estimate, not financial advice. This calculator uses the standard amortization formula and the numbers you type in. It is not a loan offer and not financial advice. A lender will check your credit, income and debts and quote its own rate and fees before you borrow.