How to Calculate How Much House You Can Afford
8 min read · Updated September 26, 2026 · by Thomas M, Registered Investment Adviser (South Carolina)
Affordability is about the monthly payment, not the sticker price. Lenders look at two ratios of your gross income to decide how much they will lend. If you apply the same ratios yourself, you can find the price range to shop in before talking to anyone. This guide walks through the calculation step by step.
Step 1: Know the two ratios
The front-end ratio caps housing costs at about 28% of gross monthly income. The back-end ratio caps all debt payments, including housing, at about 36%. Some government-backed loans allow higher (about 31/43). Take the lower of the two limits.
Step 2: Work out your housing budget
Income $100,000 means $8,333 a month gross. 28% is $2,333. The back-end limit is 36% × $8,333 = $3,000, minus $400 of other debts = $2,600. The lower figure, $2,333, is the housing budget.
Step 3: Solve for the price
Housing cost = loan payment + property tax + insurance + HOA + mortgage insurance (if applicable). With $60,000 down, a 6.5% 30-year loan, 1.1% property tax and $1,500 insurance, the highest price that fits is about $341,333.88, for a monthly payment of $2,333.33 (principal and interest $1,778.22, tax $312.89, insurance $125.00).
The effect of rate and down payment
| Scenario | Affordable price |
|---|---|
| 5.5% rate | $367,126.62 |
| 6.5% rate (base case) | $341,333.88 |
| 7.5% rate | $318,643.79 |
| $30,000 down (6.5%) | $314,926.77 |
| $100,000 down (6.5%) | $392,464.45 |
A lower down payment can mean paying mortgage insurance, which the calculator adds automatically under 20%.
Beyond the ratios
- Add closing costs (often 2–5% of the price) and a moving and repairs fund.
- Maintenance averages around 1% of the home’s value a year.
- Lenders’ maximum is not your comfortable maximum: consider childcare, commuting, savings goals and job security.
This is an educational estimate; a lender’s pre-approval is the real answer.
Practice questions
Test yourself, then tap to check. Answers are calculated by the tools linked below.
- Income $85,000, $250 of monthly debts, $40,000 down, 6.75% rate, 30 years, 1.2% property tax, $1,400 insurance. What price is affordable?
Show answer
Estimated home price you can afford: $271,146.16 · Estimated monthly housing payment: $1,983.33
- A $450,000 home, 10% down, 7% rate, 30 years. What is the monthly principal and interest?
Show answer
Monthly payment (principal + interest): $2,694.48
- What is $32.50 an hour as an annual salary on a 40-hour week?
Show answer
Annual salary: $67,600.00 · Hourly rate: $32.50
Frequently asked questions
What is the 28/36 rule?
Housing costs up to about 28% of gross monthly income, and total debt payments up to about 36%.
How much house can I afford on $100,000?
With the assumptions in this guide, about the figure shown in step 3. Your result depends on debts, down payment, rate and local taxes — try your own numbers in the calculator.
Does a bigger down payment help?
Yes: a smaller loan, and no mortgage insurance at 20% or more.
Should I borrow the maximum?
Not necessarily. Many buyers prefer a payment comfortably below the lender’s limit.
Try it yourself
Home Affordability CalculatorEstimate the home price you can afford from income, debts, down payment and rate using lender debt-to-income ratios.Mortgage CalculatorEstimate a monthly mortgage payment, total interest and total cost.Salary Calculator (Hourly to Annual)Convert hourly, daily, weekly, bi-weekly, monthly or annual pay into every other period, with an optional take-home estimate.Keep learning
How Mortgage Payments Work7 min readHow to Pay Off Your Mortgage Early7 min readHow to Convert Hourly Wage to Annual Salary5 min readReviewed by Thomas M, Registered Investment Adviser (South Carolina), who launched his own financial advisory firm in 2010. Spot a mistake? Tell us. See our editorial policy. Finance content is educational and not financial advice; see the disclaimer.