How Much House Can I Afford on My Salary?

Lenders answer this with the 28/36 rule — and you can run the same math yourself in about a minute. Here's how it works, with real numbers for $60K, $80K, and $120K salaries.

The 28/36 rule, in plain English

Take your gross monthly income (before taxes). Two limits apply:

• 28%: your total housing payment — principal, interest, property tax, homeowners insurance, and PMI if you put less than 20% down — can't exceed 28% of gross monthly income.
• 36%: your housing payment plus all other minimum debt payments (car loans, student loans, credit card minimums) can't exceed 36%.

Whichever limit is lower is your real ceiling. That's why debts matter so much: a $500/month car payment eats directly into the house you qualify for.

Worked examples (6.5% rate, 30-year loan)

These use the same math as our calculator: 1.1%/year property tax, 0.35%/year insurance, and PMI at 0.5%/year of the loan when the down payment is under 20%.

Where the money goes: the $80K example

A $268,846 home with $40,000 down means a $228,846 loan. The $1,867 monthly housing budget breaks down as:

• Principal & interest$1,446.46
• Property tax (1.1%/yr)$246.44
• Homeowners insurance (0.35%/yr)$78.41
• Total housing cost$1,771.31

Notice the mortgage payment itself is only part of the story — taxes and insurance add over $300/month here. Skipping them is the most common mistake in back-of-the-envelope affordability math.

Three ways to raise your number

1. Pay down debts. Every dollar of minimum monthly debt you eliminate frees a dollar of the 36% cap for housing. Clearing a $400/month car payment can add $50,000+ to your affordable price.
2. Grow the down payment. More down means a smaller loan — and crossing 20% kills PMI entirely, which lowers the payment on any price.
3. Watch the rate. Dropping from 7.5% to 6.5% on a $300,000 loan saves about $200/month, which buys roughly $30,000 more house under the same 28% cap.

The hidden monthly costs most calculators skip

The 28% cap covers PITI — principal, interest, taxes, insurance. Real homeownership costs more. Take the $268,846 home from the $80K example:

That's 33.7% of a $6,667 monthly gross income — and we haven't added HOA dues, which can run $200–$500/month in many condos and townhomes. Budget 1% of the home's value per year for maintenance (older homes: budget 2%), get utility estimates from the seller's history, and add HOA fees before you decide the 28% number feels comfortable. The lender's ceiling is not your budget.

Same salary, three down payments: the $300,000 test

Down payment size reshapes the monthly cost of the same house. On a $300,000 home at 6.5% (taxes + insurance ~$362.50/month):

Going from 5% to 20% down saves over $400/month on the identical house — the smaller loan and the eliminated PMI stack. That's why “save a bigger down payment” is usually better advice than “stretch for the house now”: the same salary buys a meaningfully cheaper monthly life.

When the 28/36 rule is too generous

Here's the uncomfortable truth: 28% of gross income can be 35–40% of your take-home pay after taxes, retirement, and health premiums. Lenders don't care whether you can still save — they care whether you'll default. Many buyers are happier with the 25%-of-take-home rule: keep the total housing payment under 25% of what actually hits your bank account.

On an $80,000 salary with roughly $60,000 take-home ($5,000/month), that's a $1,250/month housing ceiling — far below the $1,867 the 28/36 rule allows. That buys roughly a $200,000 home with 20% down at 6.5%: less house, but with room to save, travel, and absorb surprises. Neither number is “correct” — the 28/36 rule is the lender's maximum, and the 25% take-home rule is a comfort target. Know which one you're using before you fall in love with a listing.

At today's 7.49% rate: the $80K example, repriced

The worked examples above use 6.5% — but October 2026's average 30-year rate is around 7.49%. Same $80,000 salary, same $40,000 down, no debts:

A single percentage point costs roughly $150/month on this loan — which is why “date the rate, marry the house” exists as advice: you can refinance the rate later, but you buy the house at today's price once. If rates fall, refinancing a 7.49% loan to 6.5% later recovers that $150/month without moving. Don't over-stretch today betting on a refinance, but don't assume today's rate is forever either.

The 5-year rule: why short stays are expensive

Thinking of the $268,846 home as a 5-year starter? Look at what five years of payments actually build on the $228,846 loan:

• Principal repaid after 60 payments: $14,621 — the rest of your $86,788 in payments was interest, taxes, and insurance.
• Selling costs (agent commissions, fees, ~8%): ~$21,508 on a $268,846 sale.
• Net result: your $40,000 down payment plus five years of payments leaves you with roughly $33,000 after selling —less than the down payment you started with, unless the home appreciated.

This is the math behind the 5-year rule: if you might move within 5 years, buying only makes financial sense if you expect meaningful price appreciation. Otherwise renting — even “throwing money away” on rent — can be the cheaper path, because the first five years of a mortgage are mostly interest and transaction costs wearing a homeownership costume.

PMI: the fee you can cancel

Put less than 20% down and you'll pay Private Mortgage Insurance — on the $80K example, $95.35/month (0.5%/year on the $228,846 loan). It protects the lender, not you, and it's pure cost. But unlike most fees, PMI has an expiration date:

• You can request cancellation at 80% loan-to-value — on this loan, normal payments get the balance to $215,077 (80% of the $268,846 price) around month 57, under 5 years in. You must ask; it isn't automatic, and the lender may require a current appraisal ($300–$500).
• It drops automatically at 78% LTV — no request needed, but you'll have paid extra months of PMI waiting for it. Requesting at 80% is strictly better.
• Appreciation can fast-track it. If the home's value rises, a new appraisal showing 80% LTV based on the current value can kill PMI years early — often the highest ROI $400 you'll ever spend.

Extra principal payments pull the PMI cancellation date closer too — another quiet bonus of prepaying in the early years. Mark month 57 on your calendar the day you close; lenders won't remind you.

Run your numbers in the Home Affordability Calculator →