How Much House Can I Afford? The Complete Guide

The question every buyer asks first is also the one most people get wrong: "how much house can I afford?" Lenders will approve you for far more than you should comfortably borrow, because their job is to lend, not to protect your budget. The honest answer comes from your own math, not from the pre-approval letter.

This guide walks through the three methods that actually work — the 28% rule, the debt-to-income ratio, and a net-income reality check — then shows how to turn your salary into a concrete home price. Use the HomeMath calculator or our salary-based calculators to run your own numbers as you read.

Why the lender's number is not your number

A lender pre-approval answers a different question than you asked. It tells you the maximum the bank will lend based on its risk model — not what leaves you room to save, handle a furnace repair, or survive a job change. Lenders allow housing costs up to 36% of income in some programs, and 43% or even 50% for total debt in others. Living at that edge is how "qualified" buyers end up house-poor.

Your real ceiling should be lower than the bank's. The gap between the two is where most first-time buyers overspend.

Method 1: the 28% rule

The most reliable rule of thumb is simple: keep your total housing payment under 28% of your gross monthly income. That payment means the full PITI — principal, interest, property tax and insurance — not just the loan.

The math runs both directions:

Income to payment: multiply annual salary by 0.28, then divide by 12. A $100,000 salary allows about $2,333 a month.
Payment to income: divide a monthly PITI by 0.28 to see the salary it requires. A $2,500 payment needs about $107,000 a year.

The 28% rule is a ceiling, not a target. It is also a gross number, which overstates what you actually have to spend, since taxes and benefits come out first.

Method 2: the debt-to-income ratio (DTI)

Lenders look beyond housing to your total monthly debt load — that is the debt-to-income ratio. There are two versions:

Front-end DTI: housing payment divided by gross income, usually capped around 28%.
Back-end DTI: all monthly debts (housing, car, student loans, credit cards) divided by gross income, usually capped around 36% for conventional loans and up to 43% for FHA.

So a $100,000 earner with a $500 car payment and $300 in student loans has only about $1,533 left for housing under a 36% back-end cap — not the $2,333 the 28% rule suggests. Your other debts shrink your house budget dollar for dollar. That is why you should budget from your full debt picture, not just your salary.

Method 3: the net-income reality check

Gross income is what lenders see. Net income — what actually hits your bank account — is what you live on. A useful, more conservative target is keeping housing under 25% of net income.

Take a $100,000 salary. After federal, state and payroll taxes, plus health insurance and retirement contributions, net pay might be $70,000, or about $5,833 a month. Twenty-five percent of that is $1,458 a month for housing — dramatically less than the $2,333 gross rule allowed. The truth is usually somewhere between the two, but the net-income number is the one that keeps you from feeling broke every month.

Turning salary into a home price

The payment is only half the equation. To translate a monthly budget into a purchase price, you work backward through the loan math. Assume a 6.5% rate, 30-year term and 20% down, with average property tax (1.09%) and insurance:

$80,000 salary → about $1,867 a month → roughly a $290,000 home
$100,000 salary → about $2,333 a month → roughly a $360,000 home
$150,000 salary → about $3,500 a month → roughly a $540,000 home
$200,000 salary → about $4,667 a month → roughly a $720,000 home

These are national-average estimates. Your state's tax rate and insurance cost can swing the result by tens of thousands of dollars — a high-tax state like New Jersey buys noticeably less house than a low-tax state like Hawaii on the same salary. Check our state pages for real local rates, and use the calculator to lock in your exact number.

What your down payment does to the answer

The down payment moves two things at once. A larger down payment means a smaller loan — lower principal and interest every month. It also removes PMI once you reach 20%, which is a real line item worth 0.5% to 1% of the loan each year.

Here is the trade-off on a $400,000 home at 6.5%:

5% down ($20,000): larger loan, plus PMI, higher monthly payment
20% down ($80,000): smaller loan, no PMI, lower monthly payment

The 5%-down buyer needs less cash up front but pays more every month and more in total interest. The 20%-down buyer ties up more cash but owns more equity from day one. Neither is wrong — it depends on whether cash or cash flow is your constraint. Run both in the calculator and watch the PITI and total-interest lines move.

A worked example from start to finish

Say you earn $90,000 a year, have no other debt, and want to buy with 20% down at 6.5%.

Housing budget (28% rule): $90,000 × 0.28 ÷ 12 = $2,100 a month
Back out taxes and insurance: about $400 a month goes to tax (1.09%) and insurance on a typical home, leaving about $1,700 for principal and interest
Solve for the loan: $1,700 a month at 6.5% for 30 years supports a loan of about $269,000
Add the down payment: with 20% down, that loan corresponds to a home of about $336,000

Your answer: roughly a $335,000 home. If a lender pre-approves you for $450,000, you now know the honest number is about 25% lower. The salary calculators do this whole chain for common incomes automatically.

Three mistakes that inflate the number

First, forgetting the PITI. A $1,700 loan payment becomes a $2,100 housing payment once tax and insurance are added. If you budget on the loan number, you overshoot by hundreds a month.

Second, ignoring maintenance and utilities. Plan on roughly 1% of the home's value per year for repairs and upkeep, plus utilities that run higher than an apartment. A $400,000 home means about $4,000 a year, or $330 a month, just to maintain it.

Third, anchoring to the pre-approval. The bank's number is engineered to be spent in full. Decide your budget first, then ask the lender whether you qualify for that number — not the other way around.

Frequently asked questions

Is the 28% rule on gross or net income?

Gross. Lenders and the classic rule both use gross income because it is verifiable. If you want a more conservative figure, use 25% of net income instead.

How much house can I afford on $100,000?

About a $350,000 to $360,000 home with 20% down at current rates, before accounting for high local taxes or other debts. See our $100k salary calculator.

Does my car payment reduce how much house I can afford?

Yes, dollar for dollar under the back-end DTI cap. A $500 car payment removes roughly $500 a month from your housing budget.

Should I buy at the top of my pre-approval?

Rarely. The pre-approval is a maximum, not a recommendation. Buy where your budget is comfortable, not where the bank draws the line.

Find your exact number with the HomeMath mortgage calculator — set your income, state and down payment, and the full PITI updates instantly.