How Much House Can I Afford on My Salary?

The bank will tell you how much they'll lend you. That number is almost always more than you should actually spend. The real question isn't what you qualify for. It's what you can comfortably pay every month without your mortgage eating your entire life. Here's how to figure that out.

The 28/36 Rule: The Foundation of Home Affordability

Most lenders use the 28/36 rule to determine how much you can borrow. This rule has two parts:

The 28% rule: Your total housing costs (mortgage payment, property taxes, homeowners insurance, and HOA fees) shouldn't exceed 28% of your gross monthly income.

The 36% rule: Your total debt payments (housing costs plus car loans, student loans, credit card minimums, and other debt) shouldn't exceed 36% of your gross monthly income.

Whichever rule gives you the lower number wins. If you've got a car payment and student loans, the 36% limit will probably cap you before the 28% limit does.

Real Examples by Salary

Here's what different salaries actually buy in 2026, assuming 6.75% rate, 20% down, 1.2% property tax, and no other debts:

How Interest Rates Change the Picture

Interest rates change everything. On a $300,000 mortgage:

At 5%, your monthly payment is $1,610. At 6.75%, it jumps to $1,946. At 8%, it reaches $2,201. That's $591/month between the best and worst case, which is $213,000 over 30 years. A 0.5% rate difference sounds trivial until you realize it's $30,000-$40,000.

The Down Payment Factor

A bigger down payment means a smaller loan and lower payments. It also gets you past the 20% threshold where you avoid PMI (Private Mortgage Insurance). PMI is basically a fee you pay because the bank considers you higher risk. It typically costs 0.5-1% of the loan annually.

On a $300,000 home, a 10% down payment ($30,000) means a $270,000 loan plus roughly $175/month in PMI. A 20% down payment ($60,000) eliminates PMI and drops the loan to $240,000. The trade-off: that $60K is locked in your house instead of invested in the market. Whether that's worth it depends on how long you'll stay.

Hidden Costs Most Buyers Forget

Property taxes average 1.1% of home value nationally but range from 0.3% (Hawaii) to 2.2% (New Jersey). Homeowners insurance averages $1,500-2,500/year. Maintenance typically runs 1-2% of home value per year. HOA fees can add $200-600/month in condos and planned communities. Closing costs are 2-5% of the purchase price, paid upfront.

Rough rule: multiply your mortgage payment by 1.5 to get the true monthly cost of owning. If that number makes you uncomfortable, you're looking at too much house.

Should You Buy Less Than You Can Afford?

Yes. The 28% rule is a ceiling, not a goal. Try to keep housing at 25% or even 20% of gross income. The extra breathing room means you can still save, invest, and handle emergencies without sweating. The alternative is being house-poor, where you own a nice place but can't afford to do anything else. It's one of the most common financial traps and one of the most miserable.

Getting Pre-Approved vs. Pre-Qualified

Pre-qualification is the lender saying "yeah, you probably qualify for about this much" based on what you told them. It's casual. Pre-approval is the lender actually checking your income, assets, debts, and credit, then giving you a real number in writing. In competitive markets, sellers won't even look at your offer without a pre-approval letter. It takes 1-3 business days and hits your credit score by a few points (temporary). Letters are good for 60-90 days.

For more on this topic, see our rent vs buy analysis.

For more on this topic, see our refinancing guide.

Sources

Consumer Financial Protection Bureau (CFPB): CFPB homebuying tools and affordability guidance

Related Tools

Use our Rent vs. Buy Calculator to compare renting and buying over time. Check your loan payoff timeline to see how extra payments affect your mortgage. Plan your down payment savings with our Savings Goal Calculator.