How Much House Can I Afford? Income, DTI and Mortgage Rules Explained
How much house you can afford depends on income, debts, down payment, and interest rates — not just what a lender will approve. Learn the rules lenders use and the more conservative rules you should use to avoid becoming house-poor.
The Affordability Rules: 28/36, 43%, and Take-Home Pay
Three overlapping rules define mortgage affordability, and understanding what each measures helps you apply them correctly. The 28% Rule (Front-End DTI): Your total housing payment — principal, interest, property taxes, homeowner's insurance, PMI removal guide , and HOA fees (collectively PITI) — should not exceed 28% of your gross monthly income.
Worked Examples by Income Level
The following examples use 7% APR, 30-year term, 10% down, and estimate property taxes at 1.2% of home value and insurance at 0.35%. $60,000/year ($5,000/month gross, ~$3,800 take-home): 28% gross rule: $1,400/month PITI P&I from $1,400 PITI: approximately $1,050 after taxes + insurance Maximum loan: ~$158,000 → home price ~$176,000 (with 10% down)
How Interest Rates Change What You Can Afford
Interest rate changes have a profound impact on home buying power — more so than most buyers intuitively grasp. The relationship between rate and purchase price is nearly linear: a 1% rate change at current levels affects affordability by approximately 10%–12% of home price. Monthly P&I payment per $100,000 borrowed (30-year term): 5.0% → $537/mont
The True Monthly Costs of Homeownership
The mortgage payment is only one component of the true monthly cost of homeownership. Buyers who budget only for PITI frequently find themselves squeezed in the first year. Here are the complete categories to budget: PITI (the mortgage payment components): • Principal + Interest: the P&I from your loan payment formula • Property Taxes: varies enorm
Frequently Asked Questions
How much house can I afford on a $75,000 salary?
On a $75,000 gross salary ($6,250/month), the 28% front-end DTI rule allows up to $1,750/month in PITI. At 7% APR, 30-year term, with 10% down and estimated property taxes/insurance, this supports a loan of approximately $212,000 — a home purchase price of about $236,000. With a
What is the 28/36 mortgage rule?
The 28/36 rule is a traditional lending guideline: your housing payment (PITI) should be ≤ 28% of gross monthly income (front-end DTI), and total monthly debt payments should be ≤ 36% of gross monthly income (back-end DTI). Most conventional lenders now allow back-end DTI up to 4
How do I calculate how much mortgage I can afford?
Multiply your gross monthly income by 0.28 to get maximum PITI (housing payment including taxes and insurance). Subtract estimated monthly property taxes and insurance from that figure to get maximum P&I. Use the loan payment formula or our mortgage calculator to find the loan am
Does household income determine mortgage amount?
Yes — gross household income is the primary input for mortgage affordability calculations. Both partners' documented incomes can be combined when applying jointly. However, both partners' debts are also included in the DTI calculation. A household earning $120,000 jointly with co
What mortgage can I afford with $100,000 income?
On $100,000 gross ($8,333/month), the 28% rule allows $2,333/month PITI. At 7% APR, 30-year, 10% down, this supports approximately $292,000 loan amount and $325,000 home price. With no other debts and 20% down, buying power extends to approximately $400,000. With $800/month in ex
Is buying a house worth it at current interest rates?
This depends on your market's price-to-rent ratio, your expected holding period, and your alternative use of capital. At 7% mortgage rates, homeownership requires a long holding period (7+ years) to overcome transaction costs and beat renting in most markets. The break-even analy