How Much House Can I Afford on My Salary?

The question "how much house can I afford?" is one of the biggest financial decisions most people face. The answer depends on your income, existing debts, down payment, interest rates, and how comfortable you want to be with your monthly payment. This guide breaks down the math with real examples at different salary levels.

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) should not 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) should not exceed 36% of your gross monthly income.

The lower of these two calculations determines your maximum affordable payment. If your other debts are high, the 36% rule will be the limiting factor even if the 28% rule allows more.

Real Examples by Salary

Let's look at what different salaries can afford, assuming a 6.75% mortgage rate (current 2026 average), 20% down payment, 1.2% property tax, and no other debts.

How Interest Rates Change the Picture

Interest rates have a massive impact on affordability. 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 is a $591/month difference between 5% and 8%, or over $213,000 in extra interest over 30 years. Even a 0.5% rate reduction can save you tens of thousands.

The Down Payment Factor

A larger down payment means a smaller loan, lower monthly payments, and potentially avoiding Private Mortgage Insurance (PMI). PMI is typically required when your down payment is less than 20% and 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 is tying up more cash in the down payment rather than investing it elsewhere.

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.

A useful rule of thumb: the true monthly cost of homeownership is approximately 1.5x the mortgage payment alone when you factor in taxes, insurance, and maintenance.

Should You Buy Less Than You Can Afford?

Almost always yes. The 28% rule is a maximum, not a target. Many financial advisors recommend keeping housing costs at 25% or even 20% of gross income to leave room for savings, investments, and unexpected expenses. Being "house poor" (spending too much on housing and having little left) is one of the most common financial traps.

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.