How Much House Can I Afford? The Real Math (2026 Edition)

“Two-and-a-half times your salary” was a useful rule when interest rates were 3%. At today’s rates, it can be off by six figures. Here is how lenders actually decide what you can afford, and how to figure out the right number for yourself.

The two ratios that decide everything

Mortgage lenders care about two ratios more than anything else when sizing your loan: the front-end ratio and the back-end ratio.

The front-end ratio is your projected monthly housing payment (principal, interest, taxes, insurance, plus HOA if applicable) divided by your gross monthly income. Most lenders want this under 28%.

The back-end ratio is all of your monthly debt obligations — housing plus car loans, student loans, credit-card minimums, child support, anything that shows up on your credit report — divided by your gross monthly income. Most lenders want this under 36%, although certain programs allow up to 43% or even 50%.

That is the famous “28/36 rule”: 28% of gross income for housing, 36% for total debt. It is conservative, but it is the rule the underwriting models actually start from.

What “total housing payment” really includes

New buyers consistently underestimate the housing payment by 20–30% because they focus on principal and interest and ignore the rest. Your real monthly payment usually has five pieces, sometimes summarized as PITI + HOA:

• Principal & interest on the loan itself.
• Property taxes — typically 0.5%–2.5% of the home’s value per year, depending on where you live. Texas, New Jersey, and Illinois are high; Hawaii and Alabama are low.
• Homeowner’s insurance — usually $1,000–$3,000 per year on a typical single-family home. Higher in coastal areas and wildfire zones.
• Mortgage insurance (PMI) — required on conventional loans with less than 20% down. Costs roughly 0.3%–1.5% of the loan per year.
• HOA dues — if you buy a condo, townhouse, or in a deed-restricted community, this can add anywhere from $50 to $1,000+ per month.

A worked example: $100,000 income, 20% down

Let’s plug a typical buyer through the math. Assume:

• Gross income: $100,000/year ($8,333/month)
• Down payment available: $80,000
• Other monthly debts: $400 (a car loan)
• Mortgage rate: 6.5% (30-year fixed)
• Property tax: 1.2% of home value annually
• Homeowner’s insurance: $1,500/year

At 28% of gross income, your maximum housing payment is $2,333/month. Subtract estimated taxes and insurance and the principal-and-interest portion that fits in the budget is roughly $1,800–$1,900/month. At 6.5% on a 30-year fixed, that buys a loan of about $285,000. Add back your $80,000 down payment and you can afford a home of about $365,000.

Notice that without the $400 car payment, the back-end ratio would let you push a bit higher. Notice also that the same buyer at a 5% rate could afford approximately $405,000 — a $40,000 swing from rate alone, on the same income.

The 28/36 rule is not the whole story

Lenders will often approve you for more than the 28/36 rule suggests, especially if you have strong credit and reserves. FHA loans, for example, will go to a 43% back-end ratio in most cases and even higher with compensating factors. Just because you can qualify for that much, however, does not mean you should borrow that much.

Two underrated checks before borrowing at the top of your range:

• The stress-test rate. Could you still make the payment if your income dropped 20%, or if you took a 6-month gap between jobs?
• The savings test. After making the new mortgage payment, can you still save 10–15% of gross income for retirement and an emergency fund? Owning a home that crowds out retirement contributions is a slow-motion mistake that compounds for decades.

The hidden costs nobody warns you about

Beyond PITI, set aside a reasonable budget for ongoing ownership costs. The widely cited rule of thumb is 1% of the home’s value per year for maintenance and repairs, although this varies with the home’s age and condition. On a $400,000 home that’s about $4,000 a year, or roughly $333 a month, that you should be quietly setting aside whether you spend it that month or not.

Closing costs run another 2%–5% of the loan amount up front, and they are paid in addition to your down payment. A buyer with $80,000 saved for a down payment on a $400,000 home should plan to also bring $7,000–$12,000 to the closing table.

Quick affordability ranges by income

Approximate maximum home prices using the 28/36 rule, 20% down, a 30-year fixed at 6.5%, and ~1% of value annually for taxes and insurance combined:

• $60,000 income — about $185,000–$220,000
• $80,000 income — about $250,000–$295,000
• $100,000 income — about $315,000–$370,000
• $150,000 income — about $470,000–$555,000
• $200,000 income — about $625,000–$740,000

These ranges shift considerably with rates, property taxes, and existing debt. The lower end of each range assumes higher property taxes and modest existing debt; the higher end assumes low taxes and no other debt.

Run your own numbers

Plug your real income, down payment, and rate quote into our free mortgage calculator for an instant payment breakdown including PMI, taxes, and HOA. The calculator updates as you type, so you can drag the home price up and down and watch the payment respond — which is the fastest way to find your real budget.

Already a homeowner thinking about a refi? Walk through our refinance break-even guide next.