How much house can I afford?
Few decisions carry more weight than buying a home, and the question that trips up most homebuyers before they even start touring houses is simple: what can you actually afford?
Knowing what you can afford upfront saves you from two very different headaches: stretching too thin on a home that strains your budget for years, or underestimating what you qualify for and settling for less than you could have had.
Short on time? Skip ahead to our Home Affordability Calculator for a personalized estimate based on your own numbers.
How much home can I afford?
Figuring out how much home you can afford involves a careful look at your finances to make sure you can comfortably manage your mortgage payment along with everything else you're responsible for.
Here are the calculations and considerations that will help you set a realistic budget for your new home:
How much house can I afford based on my monthly income?
As a general rule, your monthly mortgage payment shouldn't exceed 28% of your gross monthly income. This percentage is commonly known as the housing expense ratio or front-end ratio.
This figure includes your mortgage principal, interest, property taxes and homeowners insurance.
For example, if your gross monthly income is $5,000, you should try to keep your total monthly housing costs at or below $1,400.
How can I calculate how much home I can afford?
Here’s a step-by-step guide to help you calculate how much home you can afford:
1. Calculate your earnings
To calculate your gross monthly income, divide your annual pre-tax income by 12. For example, if you earn $84,000 annually, your gross monthly income is $7,000.
This figure includes all income sources such as:
- Salary and Wages: your regular salary or hourly wages
- Bonuses and Commissions: variable income like annual bonuses, sales commissions or performance incentives, ideally averaged over the past year for a more accurate picture
- Freelance or Side Gig Income: any additional income from freelance work, part-time jobs or side gigs
- Investment Income: dividends, interest or rental income, since consistent investment income can strengthen your borrowing power
- Other Sources: alimony, child support or regular financial gifts from family members
If your income fluctuates, such as with seasonal work or freelance projects, calculate your average monthly income over a longer stretch, like the past two years, to smooth out the peaks and valleys.
While it's smart to stay cautious, you can conservatively factor in reasonable projections of future income growth, like an expected promotion, to get a fuller view of your financial picture.
If you're self-employed, your income calculation will involve a few extra steps. Lenders typically look at your net business income after expenses rather than gross revenue, so you'll want detailed financial statements, profit and loss reports and recent tax returns handy to confirm your earnings.
2. Add up your debts
Next, calculate your monthly non-housing debt payments, such as:
- Student loans
- Car loans
- Credit card payments.
Don't include variable expenses like groceries or utilities. For example, if you spend $600 a month on these debts, that figure gets used in the calculation below.
3. Determine your housing budget
Use the 28/36 rule to answer the question “how much house can I afford based on my salary?”:
- 28% Rule: spend no more than 28% of your gross monthly income on housing costs
- 36% Rule: spend no more than 36% of your gross monthly income on total debt payments, including housing costs
Using the 28/36 rule, you can calculate your maximum potential housing payment like this:
- Calculate 36% of your gross monthly income to find your total debt limit, e.g. $7,000 × 0.36 = $2,520
- Subtract your non-housing debt payments from that total to find your maximum housing budget, e.g. $2,520 - $600 (non-housing debt payments) = $1,920
That means you can typically afford to spend up to $1,920 per month on housing.
4. Use our home affordability calculator
Our home affordability calculator is a valuable tool that helps you estimate how much house you can afford based on your income, debts and down payment.
Here's how that breaks down across a few different scenarios, all assuming a 30-year fixed mortgage at a 6.5% interest rate, which is close to where average rates have sat through much of 2026*:
- For a $300,000 home with a 20% down payment ($60,000), your principal and interest would run approximately $1,517 a month. Add roughly $500 for taxes and insurance and you're looking at about $2,017 total.
- For a $400,000 home with a 20% down payment ($80,000), principal and interest would run approximately $2,023 a month. With taxes and insurance factored in, that's approximately $2,523 total.
- For a $500,000 home with a 20% down payment ($100,000), principal and interest would run approximately $2,529 a month. With taxes and insurance added, that comes to approximately $3,029 total.
These are hypothetical scenarios, but they give you a quick sense of what you'll likely be able to afford. Your actual rate will depend on your credit profile, loan type and the market at the time you lock, so it's worth running your own numbers through the calculator.
5. Consider your financial needs
While the 28/36 rule and affordability calculators provide a solid framework, you should also factor in your overall financial picture, including:
- Other financial goals: funds you may need for retirement savings, education or an emergency fund
- Variable Expenses: making sure you can comfortably cover maintenance and utilities without straining your budget
- Future Income Stability: the stability and growth potential of your income going forward
For first-time homebuyers, a practical approach is to compare potential mortgage payments to your current rent to gauge affordability.
Factors that affect how much house I can afford
Here are the main components that shape how much house you can afford:
Down payment
The larger your down payment, the less you need to borrow, which can lower your monthly mortgage payment and potentially qualify you for a better interest rate.
A larger down payment can also help you avoid private mortgage insurance (PMI), which is typically required if your down payment is less than 20%.
Here's the minimum down payment for different loan types:
- Conventional loans: 3% to 5% down payment options available
- FHA loans: 3.5% down payment option available
- VA and USDA loans: may offer 0% down payment options
Income
Lenders consider your gross monthly income, meaning your income before taxes and deductions, when deciding whether to approve you for a mortgage.
To verify your income sources, they'll typically ask for:
- Pay stubs
- Tax returns
- Bank statements
- Any contracts or agreements related to freelance or rental income.
Debt-to-income ratio (DTI)
Your debt-to-income (DTI) ratio measures your monthly debt payments against your gross monthly income. There are two versions of this ratio:
- Front-End Ratio: This ratio considers only your housing expenses.
- Back-End Ratio: This ratio includes all monthly debt payments (housing expenses plus other debts), often set at 36% of your gross income.
Qualified mortgage standards allow for DTIs up to 43%.
Property taxes
Property taxes vary by location and are often folded into your mortgage payment through an escrow account.
To estimate your property taxes, check online property listings or contact your local tax office.
As a rough benchmark, property taxes typically run about 1% of a home's value annually, though this varies significantly by state and county.
Insurance
Homeowners insurance is mandatory for mortgage approval and protects your property against risks like:
- Fire
- Theft
- Natural disasters.
Insurance costs vary based on the home's location, value and features, and premiums have climbed in many parts of the country in recent years due to rising rebuilding costs and increased weather-related risk.
To estimate insurance costs, ask for quotes from insurance companies or check with a real estate agent who can provide an estimate based on similar properties in your area.
HOA dues
If your property is part of a homeowners association (HOA), you'll need to pay monthly HOA dues. These fees cover the maintenance and upkeep of shared spaces and amenities. HOA dues vary widely, so it's worth factoring them into your monthly housing budget.
National estimates for 2026 vary depending on the source and methodology, but a reasonable planning range is roughly $250 to $350 a month, with costs running considerably higher in dense coastal markets and lower in much of the Midwest and South.
How can I start the mortgage process?
Once you understand your home affordability, the mortgage process comes next. Here's what we offer to support you along the way:
Our Mortgage Payment Calculator gives you an instant, customized estimate of your future mortgage payment, broken down by:
- Principal
- Interest
- PMI
- Property taxes
- Insurance
- HOA fees
Using our calculator, you can explore different scenarios, adjust variables and see how changes in loan terms and interest rates affect your monthly payment. That transparency helps you make informed decisions and find a mortgage that fits your lifestyle and budget.
Next comes getting pre-approved. Our Digital Mortgage application streamlines that process, letting you complete it online at your own pace.
Within minutes, you'll receive a pre-approval and a clear picture of your home affordability options. Pre-approval doesn't just give you an edge in a competitive housing market; it also gives you a solid foundation for the rest of your financial planning.
We also offer RateReduce programs, such as the 2-1 buydown and 1-0 buydown, which give you flexible options to lower your initial mortgage rate. These can be especially useful in a year like 2026, when rates have moved around enough that a lower starting rate can make a meaningful difference in your early monthly payments.
Home affordability FAQs
1. How does my credit score affect my ability to get a mortgage?
Your credit score plays a major role in the interest rate and terms you're offered. Lenders use it to gauge how reliable you are as a borrower, and generally, a higher score qualifies you for a lower rate, which can save you thousands of dollars over the life of the loan.1
2. What are closing costs, and how much should I expect to pay?
Closing costs are the fees and expenses you pay when finalizing a mortgage. They typically run 2% to 5% of the loan amount and can include things like appraisal fees, title insurance, attorney fees and lender fees.
3. What is private mortgage insurance (PMI), and when is it required?
PMI protects the lender if you default on your loan. It's usually required when your down payment is less than 20% of the home's purchase price. PMI adds to your monthly payment, but it can typically be canceled once you've built up 20% equity in your home.
4. Can I use gift money for a down payment?
Yes, many lenders allow gift money from family members to go toward your down payment. You'll need a gift letter confirming the money is a gift and not a loan that needs to be repaid, signed by both the giver and the borrower.
5. How does an adjustable-rate mortgage (ARM) work, and is it right for me?
An adjustable-rate mortgage offers a lower initial rate than a fixed-rate mortgage, then adjusts periodically based on market conditions, meaning your payment can rise or fall over time. ARMs can make sense if you plan to sell or refinance before the adjustment period kicks in, but they carry more risk if rates climb by the time your rate resets.
6. How much should I save for a down payment before buying?
It depends on the loan type. A 20% down payment helps you avoid PMI and typically gets you the best rate, but many buyers put down far less. Add some options, VA or USDA loans can require nothing down for eligible buyers. The tradeoff for a smaller down payment is a higher monthly payment and often PMI until you build up equity.
Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.
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* Sample shown for illustration purposes and only features principal and interest. This is not intended to provide mortgage or other financial advice. No Annual Percentage Rate (APR) is shown because the information provided is strictly to show a comparison of the differences in monthly principal and interest payments for each interest rate. Each loan, consumer, financial, employment and credit profile, and loan program will have different costs which will affect the APR. The APR will be higher. Not all borrowers will qualify for all rates.
1 Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact Rate for current rates. Restrictions apply.
