How Much House Can You Actually Afford?
Buying a home is one of the biggest financial decisions of your life. But how do you know what price range makes sense for your situation? There are two widely used guidelines that can help: the 28/36 rule and the 3x income rule.
The 28/36 Rule
Most lenders use this as a starting point. It says:
- Your monthly mortgage payment should not exceed 28% of your gross monthly income
- Your total monthly debt payments (mortgage + car + student loans + credit cards) should not exceed 36%
Example: If your gross income is $7,000/month, your mortgage payment should stay under $1,960, and your total debts under $2,520.
The 3x Income Rule
A simpler rule of thumb: the home price should be no more than 3 times your annual household income. On a $90,000 salary, that's a $270,000 home. In high-cost areas, many buyers stretch to 4–5x, but that carries more risk.
Don't Forget These Costs
Your mortgage payment is only part of the picture. Budget for:
- Property taxes — typically 1–2% of home value per year
- Homeowner's insurance — about $1,500/year on average
- HOA fees — can be $0 to $1,000+/month depending on community
- Maintenance — plan for 1% of home value per year
How Much Down Payment Do You Need?
While 20% down avoids PMI (private mortgage insurance), many loans allow as little as 3–5% down. FHA loans require just 3.5% if your credit score is 580+.
| Down Payment | PMI Required? | Typical Loan |
|---|---|---|
| 3–5% | Yes | Conventional / FHA |
| 10% | Yes (lower rate) | Conventional |
| 20%+ | No | Conventional |
| 0% | No | VA / USDA |
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Calculate Now →The Bottom Line
Lenders will tell you what you can borrow. But the smarter question is what you can comfortably afford while still saving for retirement, emergencies, and life. Staying well under your maximum qualification keeps you financially resilient.