How Much House Can I Afford? (28/36 Rule + Real Math)
The Short Answer
Your total monthly housing payment (principal, interest, taxes, insurance, HOA — "PITI + H") should stay at or below 28% of gross monthly income. Total debt payments (housing + car + student loans + minimum credit cards) should stay at or below 36%. That's the 28/36 rule, and it's what conservative underwriters used before the 2008 crash.
Modern lenders will approve you at 43–50% DTI. That's the ceiling, not the target.
The Real Formula
Max monthly PITI = gross monthly income × 0.28
Work backward from there:
- Take your target monthly payment.
- Subtract estimated property tax (national average ≈ 1.1% of home value / year ÷ 12).
- Subtract homeowners insurance (~$100–$200/month).
- Subtract HOA if applicable.
- What's left is your budget for principal + interest.
Plug principal + interest into any mortgage calculator with today's rate and your down payment to get the home price.
A Worked Example
- Household income: $9,000/month gross ($108k/year).
- 28% ceiling: $2,520/month all-in housing.
- Assume $350 taxes + $130 insurance + $0 HOA = $480 non-mortgage.
- Room for principal + interest: $2,040/month.
- At 7% for 30 years, $2,040/month supports a mortgage of ~$307,000.
- With 10% down, that's a ~$341,000 home.
Lenders using 43% DTI would approve this same buyer for a $475,000 home. That extra $130k of house shows up as thinner emergency funds, no retirement contributions, and a family that can't miss a paycheck.
What Lenders Ignore
- Maintenance: budget 1% of home value per year.
- Furniture and moving: first-year cost easily $5–15k.
- Utilities: a bigger house means bigger bills.
- Lifestyle creep into the neighborhood — nicer cars, nicer schools, nicer everything.
Down Payment Reality
A 20% down payment avoids private mortgage insurance (PMI) and gives you equity buffer, but takes years to save. See how to save for a house down payment for the fastest path. 10% down with PMI is fine if the numbers otherwise work.
Rent vs Buy First
Before you optimize how much house, decide whether to buy at all. Read rent vs buy: is owning a home always better? — in many high-cost markets in 2026, renting and investing the difference wins.
Run Your Numbers
Log into the budget planner, enter your income and existing debts, and the debt-to-income ratio calculator will tell you exactly how much room you have before you talk to a lender.