How Much House Can I Afford? A Practical Way to Find Your Number
Use the 28/36 rule to estimate how much house you can afford, with a $100,000 income example, the effect of down payment and PMI, and the costs people forget.
The most expensive mistake in home buying is deciding on a price first and checking the budget later. A lender may approve you for more than you can comfortably pay. Here is the rule most lenders use, a worked example, and the costs that catch first-time buyers by surprise.
The 28/36 rule
A widely used guideline for conventional loans says:
- 28%: your housing payment (principal, interest, property tax, insurance, PMI and HOA) should be at most 28% of your gross monthly income.
- 36%: all your monthly debt payments, housing included (car loans, student loans, credit card minimums), should be at most 36% of gross monthly income.
Your limit is the lower of the two. Some loan programs allow higher ratios, but higher is not always wise.
Example: $100,000 household income
- Gross monthly income: 100,000 ÷ 12 = $8,333
- 28% for housing: $2,333 a month
- 36% for all debts: $3,000 a month
With a $400 car payment, the 36% rule leaves $2,600 for housing, so the 28% limit of $2,333 is the one that binds.
Now turn $2,333 into a price. Assuming a 6.5% rate on a 30-year loan, property tax of 1.1% a year and insurance of $1,500 a year:
| Down payment | Approximate maximum price |
|---|---|
| 20% (no PMI) | About $370,000 |
| 10% (with PMI at 0.5%) | About $316,000 |
A smaller down payment means a bigger loan and PMI, so the same monthly budget buys less house.
The cash you need upfront
- Down payment: 20% avoids PMI on conventional loans; many programs accept 3% to 5%, and FHA loans start at 3.5%.
- Closing costs: typically 2% to 5% of the loan amount.
- Moving and setup: furniture, appliances, repairs and utility deposits.
- Emergency fund: keep several months of expenses in savings after closing. A house with no cushion is fragile.
Costs people forget
- Maintenance: a common rule of thumb is 1% of the home's value a year, more for older homes.
- Property tax increases after reassessment.
- Insurance premiums, which have risen sharply in some states.
- HOA fees and special assessments.
- Higher utility bills in a larger home.
A more conservative approach
The 28/36 rule uses gross income, before taxes and retirement savings. If you also want to save for retirement, travel or children's education, many planners suggest keeping housing closer to 25% of gross income, or around a third of take-home pay.
How to find your number
- Calculate 28% of your gross monthly income and 36% minus your other debts. Use the lower one.
- Open the mortgage calculator, enter your down payment, a realistic rate, taxes and insurance.
- Adjust the home price until the total monthly payment matches your limit.
- Leave room for maintenance and savings before you commit.
Frequently asked questions
How much house can I afford on a $100,000 salary?
With the 28/36 rule, about $2,333 a month for housing. With 20% down, a 6.5% rate, 1.1% property tax and $1,500 a year in insurance, that is roughly a $370,000 home.
What is the 28/36 rule?
Housing costs should stay under 28% of gross monthly income, and all debt payments under 36%.
Do I need 20% down to buy a house?
No. Many loans accept 3% to 5% down, and FHA loans 3.5%, but less than 20% on a conventional loan usually means paying PMI.
How much should I keep for maintenance?
A common rule of thumb is about 1% of the home's value per year.
Lawyer for almost 20 years, focused on digital law, and creator of CoringaWeb. He writes the guides and builds the tools on this site.
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