How Much House Can I Afford? Income, Debt and Rates

"How much house can I afford?" is one of the most searched money questions in the United States. The answer is not one number. It depends on your income, your other debts, your down payment, the interest rate and the taxes and insurance where you live. This guide shows how to work it out step by step, with real numbers you can check.

If you want to try your own numbers as you read, open the mortgage calculator. It adds property tax, insurance and PMI to the loan payment, so you see the full monthly cost.

The two ratios lenders use

Lenders do not only look at the price of a house. They look at how big the monthly payment is compared with your income. They use your gross income, which is your pay before taxes. Two ratios matter.

• The housing ratio (front-end ratio). Your total monthly housing payment divided by your gross monthly income.
• The total debt ratio (back-end ratio or debt-to-income ratio). Your housing payment plus every other monthly debt payment, divided by your gross monthly income. Car loans, student loans, credit card minimums and personal loans count. Rent, utilities and groceries do not.

A traditional guideline, often called the 28/36 rule, says to keep the first ratio near 28% and the second near 36%. It is a guideline, not a law. Real lenders use their own limits. For example, Fannie Mae's Selling Guide sets a maximum total debt ratio of 36% for manually underwritten loans, which can go up to 45% when the borrower meets extra credit and savings requirements. For loans run through Fannie Mae's automated system, the maximum is 50%.

The Consumer Financial Protection Bureau explains the total debt ratio the same way: it compares your monthly debt payments with your monthly income, and different loan products and lenders have different limits.

What counts as the housing payment (PITI)

Many people forget this part. The "housing payment" in the 28% guideline is not just the loan payment. It is the whole monthly cost of owning the home, often shortened to PITI:

• Principal: the part of the payment that pays down the loan.
• Interest: the cost of borrowing.
• Taxes: property tax on the home.
• Insurance: homeowners insurance.

Two more costs are added when they apply: private mortgage insurance (PMI), which is common when your down payment is under 20%, and homeowners association (HOA) fees. Lenders often collect taxes and insurance each month in an escrow account and pay the bills for you. The CFPB describes an escrow account as an account set up by your lender to cover property-related costs, funded by a part of your monthly mortgage payment.

So if a lender says "28% of your income," that is the number to compare with all of these costs together, not with principal and interest alone.

A worked example: $90,000 a year

Let us walk through one case. These are example numbers, not a quote.

1. Monthly gross income: $90,000 ÷ 12 = $7,500.
2. Housing limit at 28%: $7,500 × 0.28 = $2,100 a month for PITI.
3. Total debt limit at 36%: $7,500 × 0.36 = $2,700 a month for housing plus all other debts. With no other debts, the 28% limit is the tighter one.
4. Assumptions: a 30-year fixed loan at 7.4%, a 20% down payment, property tax of 1.1% of the price each year ($270 a month on this home), and insurance of $2,400 a year ($200 a month).

The 7.4% rate is the average 30-year fixed rate in Freddie Mac's weekly survey on October 8, 2026. Your own rate depends on your credit, your down payment and the lender.

Under these assumptions, a home price of about $294,300 fits. The loan is about $235,500, and the monthly cost is:

The down payment on that home is about $58,900, plus closing costs.

How other debts change the answer

Now add debts. Say you also pay $900 a month on a car loan and student loans. Your total debt limit is still $2,700, but $900 of it is already used. That leaves $1,800 for housing, which is below the 28% limit of $2,100. The tighter limit now decides the answer:

Paying off a $300 car payment can raise the home you can afford by about $46,000 in this example. This is why many lenders ask you to pay down debt before you apply.

How the interest rate changes the price

The rate has a big effect, because it sets how much of each payment is interest. Here is the same $90,000 income, no other debts, 20% down, at three rates:

Going from 6.0% to 7.4% takes about $38,000 off the price you can afford. The other way to see it: a $294,300 home costs about $1,881 a month at 6.0% and $2,100 at 7.4%. That is $219 more every month for the same house.

How the down payment changes the price

A smaller down payment means a bigger loan. It can also bring PMI. Here is the $90,000 example with 10% down and PMI of 0.6% of the loan a year (an example rate; real PMI depends on your credit and loan):

• 20% down: home price about $294,300, cash down about $58,900.
• 10% down: home price about $250,100, cash down about $25,000, with about $113 a month of PMI inside the $2,100.

So a smaller down payment lets you buy sooner with less cash, but the monthly limit allows a cheaper home. The CFPB notes that you can ask to cancel PMI when your balance is scheduled to fall to 80% of the original value, and lenders must end it automatically when it reaches 78%.

Income examples at 7.4%

All rows assume a 30-year loan at 7.4%, 20% down, property tax of 1.1% a year and insurance of $2,400 a year. At $90,000 and $120,000 the housing ratio is the tighter limit, so $600 of other debts does not change the answer. At $60,000 it does.

Approved is not the same as affordable

The guideline gives you a ceiling, not a target. Lenders measure risk to themselves. They do not know your childcare costs, your commute, your health costs or how much you want to save. Before you choose a price, test it:

• Try the payment first. For two or three months, move the difference between your rent and the new payment into savings. If it hurts, the price is too high.
• Keep a cash cushion. Homes bring surprise costs, such as a repair or a tax bill that rises. Keep an emergency fund after the down payment and closing costs.
• Count the one-time costs. Closing costs, moving and first repairs are paid in cash. The Loan Estimate you get from a lender lists the closing costs for your loan.
• Remember property tax and insurance change. They can rise every year, which raises your payment even with a fixed-rate loan.

How to find your own number

1. Write down your gross monthly income, before taxes.
2. Multiply by 0.28. This is your housing limit.
3. Add up your monthly debt payments. Multiply your income by 0.36 and subtract the debts. This is your second limit.
4. Use the smaller of the two limits as your monthly budget for housing.
5. Subtract an estimate of monthly property tax and insurance for the area. What is left pays the loan.
6. Use a mortgage calculator to see what loan that payment supports at today's rate, then add your down payment.
7. Check the result against your real budget, and lower it if it does not feel comfortable.

Frequently asked questions

How much house can I afford on $60,000 a year?

With no other debts, a 20% down payment and a 7.4% rate, about $185,900 in this example. With $600 a month of other debts, the total debt limit lowers it to about $154,900. Your area's taxes and insurance can move this up or down.

Is the 28/36 rule still used?

It is still a common starting point, and many people use it to set a budget. Lenders now use their own limits, and many focus on the total debt ratio. Fannie Mae's limits are 36% for manual underwriting, up to 45% with extra requirements, and up to 50% for its automated system.

Does rent count as a debt?

No. Your current rent is replaced by the new housing payment, so it is not added. Debts such as car loans, student loans, credit cards and personal loans are counted.

What is a good down payment?

Twenty percent avoids PMI on most conventional loans, but many buyers put down less. A smaller down payment means a larger loan and, usually, PMI. Compare the full monthly cost for each choice.

Do property taxes and insurance really matter that much?

Yes. In the $90,000 example, taxes and insurance are $470 of the $2,100 limit, which is more than a fifth. In places with high property taxes, they take a bigger share, and the same income buys a cheaper home.

Can I get a loan above the usual limit?

For 2026, the baseline conforming loan limit for a one-unit home is $832,750 in most of the country, and up to $1,249,125 in high-cost areas, according to the Federal Housing Finance Agency. Loans above the limit are called jumbo loans and follow the lender's own rules.

The bottom line

A home is affordable when the full monthly cost, with taxes and insurance, fits your income and your life. Use the 28% and 36% guideline to find a ceiling, test the payment against your real budget, and leave room for the surprises that come with every house.

Sources

• Primary Mortgage Market Survey (average rates, week of October 8, 2026), Freddie Mac
• Selling Guide B3-6-02: Debt-to-Income Ratios, Fannie Mae
• What is a debt-to-income ratio?, Consumer Financial Protection Bureau
• What is an escrow or impound account?, Consumer Financial Protection Bureau
• When can I remove private mortgage insurance (PMI) from my loan?, Consumer Financial Protection Bureau
• Loan Estimate explainer, Consumer Financial Protection Bureau
• FHFA announces conforming loan limit values for 2026, Federal Housing Finance Agency

The home prices above are examples worked out by script with the assumptions stated in each table. Property tax, insurance, PMI and rates differ by place and lender, so use quotes for your own case. Last reviewed October 12, 2026.