Most buyers can comfortably afford a home whose full monthly cost (mortgage, property tax, insurance and any mortgage insurance) is about 28% of gross income, with all debts including the mortgage under about 36%. Lenders may approve more, but the number that matters is the payment you can live with, and that depends on your rate, down payment and local taxes as much as on the price.
Start with the monthly payment, not the price
A home’s price tells you surprisingly little about what it costs to own. Two $450,000 homes can differ by hundreds of dollars a month because of property taxes, insurance, homeowners association dues or mortgage insurance. So work backward: decide what monthly payment fits your life, then see what price that payment supports in the places you’re considering.
The classic guideline is the 28/36 rule: housing costs up to 28% of your gross monthly income, and total debt payments (housing plus car loans, student loans and credit cards) up to 36%. On a $120,000 household income, that’s about $2,800 a month for housing and $3,600 for all debts together.
Try it: Affordability calculatorEnter your income, debts and savings to see a comfortable price and a stretch price, with this week’s rates.What lenders will approve vs. what’s comfortable
Lenders look at your debt-to-income ratio (DTI): total monthly debt payments divided by gross monthly income. Many conventional loans allow up to about 45% to 50% with strong credit and savings, and FHA loans can go higher with automated approval. That doesn’t mean you should borrow that much. A payment at 45% of gross income can leave little room for savings, repairs and the surprises that come with owning a home.
Use the debt-to-income calculator to see where you stand today, and how paying off a car loan or credit card balance changes the picture. Paying off a $300-a-month debt can raise your buying power by roughly $40,000 to $48,000 at today’s rates.
The five numbers that set your budget
| Factor | Why it matters |
|---|---|
| Income | Lenders use gross (before-tax) income; steady W-2 income is simplest to document. |
| Monthly debts | Every $100 of monthly debt reduces what you can borrow by roughly $13,000 to $16,000 at today’s rates. |
| Interest rate | Each 1 percentage point changes the payment on a $400,000 loan by about $250 a month. |
| Down payment | A bigger down payment lowers the loan and can remove mortgage insurance at 20%. |
| Taxes and insurance | Property tax rates range from under 0.5% to over 2% of value a year depending on where you buy. |
Rates matter more than most buyers expect. See how much your price range moves with the rate in the rate sensitivity tool, and check what your credit score does to your rate with the credit score cost calculator.
A worked example
Say your household earns $110,000 a year, you pay $450 a month toward a car, and you’ve saved $60,000. At 28% of income, your comfortable housing budget is about $2,570 a month. With a 6.5% rate, 10% down, 1.2% property tax and typical insurance and mortgage insurance, that supports a price around $350,000. Stretching to 36% of income for housing would push you near $460,000, but you’d have far less room each month.
Now turn it around: if you know your target price, the income needed calculator shows the income a lender would want to see for that home at today’s rates.
Don’t forget the cash to buy
Your down payment is only part of the cash you need. Closing costs typically run 2% to 5% of the price, and you’ll want reserves left over after closing. Estimate the total with the closing cost estimator and the true cost to buy tool, which adds up the first-year costs most calculators leave out.
Where does your budget work?
A budget is only useful if it matches real homes in places you’d live. Where can I afford to buy? compares your budget with typical prices in every ZIP code in a state, and the town finder lets you add must-haves like commute time, walkability or low property taxes.
Before you shop
Once you have a range, get pre-approved so sellers take your offers seriously. The pre-approval estimator shows roughly what a lender might approve, and the document checklist lists what you’ll need to gather.
Common questions
How much house can I afford on a $100,000 salary?
Roughly $300,000 to $340,000 at a 6.5% rate with 10% down and average taxes, keeping housing near 28% of gross income. Lower taxes, a bigger down payment or a lower rate raise that; monthly debts lower it.
Is the 28/36 rule still used?
It’s a guideline rather than a rule. Many lenders approve debt-to-income ratios up to about 45% to 50%, but 28% for housing and 36% for all debts is a comfortable target for most budgets.
Should I buy at the top of my pre-approval?
Usually not. Your pre-approval is the most a lender will lend, not what fits your life. Leave room for savings, repairs and rising costs like taxes and insurance.
Updated October 2026. Educational content. OfferBacked is not currently a lender and doesn’t issue pre-approvals or loans.