How Much House Can I Afford Based on My Income?

Every affordability rule you have ever heard is really about the same thing. Can you make the payment every single month without wrecking everything else in your budget? Lenders frame it as ratios, but the question is still this simple. The price of the house is just the mathematical result of your payment, the rate, and the length of the loan.

The ratio lenders and planners lean on most is the 28/36 rule, and Chase spells it out plainly. Your housing payment, meaning principal plus interest plus property taxes plus homeowners insurance, should stay at or below 28% of your gross monthly income. Your total debt, including the mortgage, car loans, student loans and credit card minimums, should stay at or below 36%. Those two ceilings give you the honest range.

The rules run on gross income, the number before taxes, because that is what lenders verify. If you earn $6,000 a month gross, your housing ceiling is roughly $1,680 at 28%. What you actually take home after taxes, health insurance and retirement contributions could be $4,300, so the payment bites harder than the ratio looks. Plan on the post-tax version in your head, even though the lender uses the pre-tax one.

Here is how the rule plays out on common incomes, using the 6.76% 30-year fixed rate from Freddie Mac's weekly survey for the week ending September 10, 2026 (fred.stlouisfed.org/series/MORTGAGE30US). Each table row assumes a 20% down payment and removes property taxes and insurance from the housing budget.

Run your own numbers this way. Take gross monthly income, multiply by 0.28, subtract the property tax and insurance you expect in your area, and that is your principal and interest budget. Then divide by roughly 6.50 to get the loan amount in thousands, and add your down payment. Ten minutes and a calculator gets you a better answer than any lender quote you will see online.

Do the numbers once and you will never need an estimate. At a 6.76% 30-year fixed rate, every $1,000 you borrow costs about $6.50 a month in principal and interest. Why? The monthly payment factor on a 6.76% loan over 360 months is 0.00649, so $1,000 times that equals $6.49. That factor is the whole ballgame.

So a $200,000 loan at that rate runs about $1,298 a month before taxes and insurance. Add $400 for taxes and insurance in a normal cost area and you are at $1,698, which is exactly 28% of a $6,068 monthly income or about $72,800 a year. Notice the price tag does not appear in any of that. The payment is the constraint, and the rate decides how much house a given payment buys.

• Debt to income ratio. Conventional lenders generally prefer total DTI below 43%, though some programs accept up to 50% with strong compensating factors.
• Credit score. Higher scores get lower rates, which is worth thousands over a loan. Check your score before you start house hunting.
• Down payment. 20% avoids private mortgage insurance, but 3% to 5% down programs exist for first time buyers. PMI is a monthly bill, not a one time cost.
• Two years of clean income history. Freelancers and new businesses need extra documentation, and lenders often count 75% of variable income.
• Cash reserves after closing. You will be asked to show a few months of payments left after you buy, on top of the down payment.

The back end ratio is where people get tripped up. You might qualify at 28% for housing alone, but student loans, a car payment and credit card minimums push your total debt over 43%, and now the lender is capsizing you for a smaller loan, or asking you to pay down debt first. Your full debt picture is as important as your income.

The monthly payment is the headline number, but the true cost of a house includes pieces that never show up in a lender's ratio. Budget for all of them or the affordability math lies to you.

• Property taxes. They rise over time and vary wildly by county. Check the actual bill on the exact house, not the neighborhood average.
• Homeowners insurance and, in flood or fire zones, a second policy on top.
• Private mortgage insurance if your down payment is under 20%. Usually 0.5% to 1.5% of the loan per year, stuck on until you hit 20% equity.
• HOA fees if the property has them, which can run $100 to $500 or more a month.
• Maintenance. The honest industry figure is 1% to 4% of the home value per year in repairs and upkeep. A $400,000 house is a $4,000 to $16,000 annual line item.

1. Add up your gross monthly income from all sources that a lender will count.
2. Multiply by 0.28 for your housing ceiling, then subtract the local property tax and insurance estimate for your area.
3. Divide what is left by 6.50 to get the loan amount in thousands at today's 6.76% rate.
4. Add your down payment to that loan number to get a house price range. Run it again at 0.36 for total debt to see if your other debts spill over the cap.
5. Get a pre approval from a real lender and compare at least two rate quotes on the same day.
6. Then subtract 20% from what you feel comfortable with, because every homeowner I know undershot their budget on the first pass.