How Much House Can I Afford? A Simple Rule-Based Guide

Before you fall in love with a listing, it helps to know roughly what price range actually fits your budget. Lenders and financial planners lean on a handful of simple rules of thumb to answer this — none of them perfect, but together they give a realistic starting range before you talk to a lender.

The 28/36 rule

This is the rule most mortgage lenders actually use when qualifying you for a loan:

• 28% rule: your monthly housing costs (mortgage principal + interest + property tax + insurance, often called PITI) shouldn't exceed 28% of your gross (pre-tax) monthly income.
• 36% rule: your total monthly debt payments — housing plus car loans, student loans, credit cards, and other debt — shouldn't exceed 36% of gross monthly income.

Lenders call this your debt-to-income ratio (DTI), and it's one of the biggest factors in what loan amount you'll actually qualify for.

The 3–5x income rule

A rougher, older rule of thumb: your total home price shouldn't exceed roughly 3 to 5 times your gross annual household income, depending on your down payment, interest rates, and other debt. It's less precise than the 28/36 rule but useful as a quick sanity check.

A worked example

Say your household earns $90,000 a year, or $7,500 a month, before taxes.

• 28% rule: $7,500 × 0.28 = $2,100 max monthly housing payment (PITI).
• 36% rule: $7,500 × 0.36 = $2,700 max total monthly debt, including that housing payment.

If you already pay $400/month toward a car loan and student loan, that leaves $2,700 − $400 = $2,300 for housing under the 36% rule — but the 28% rule still caps you at $2,100, so $2,100 is your binding limit. From there, a mortgage calculator can translate that monthly payment cap into an approximate home price, once you factor in your down payment, interest rate, property tax rate, and insurance estimate.

Other factors that matter

• Down payment size — a larger down payment lowers your loan amount and monthly payment, and can help you avoid private mortgage insurance (PMI) below 20% down.
• Interest rate — even a 1-point difference in rate meaningfully changes what monthly payment a given loan amount produces.
• Credit score — directly affects the interest rate you're offered, and therefore your affordable price range.
• Property tax and insurance rates — vary significantly by location and are easy to underestimate.

This article is for general educational purposes and isn't financial advice. Actual affordability depends on your full financial picture and lender's specific underwriting criteria — consider speaking with a qualified mortgage professional.