How Much House Can I Afford?
How much house you can afford depends on far more than the price tag: your income, existing debts, deposit and the interest rate all shape what is comfortable. Here is how lenders and sensible buyers think about it.
The 28/36 rule
A common guideline says your housing payment should stay under about 28% of your gross monthly income, and all your debt payments together under about 36%. Staying inside those limits keeps the loan affordable and improves your chances of approval. Regulators use a related debt-to-income test: many "qualified mortgages" cap total debt payments near 43% of gross income (see the Consumer Financial Protection Bureau), so 36% leaves a sensible margin.
What moves the number
- Income: higher income supports a larger payment, within the 28/36 limits.
- Existing debts: car loans and cards eat into the 36%, lowering what is left for a mortgage. Check your debt-to-income ratio.
- Down payment: a bigger deposit means a smaller loan and can avoid mortgage insurance. See the Down Payment Calculator.
- Interest rate and term: a higher rate or shorter term raises the monthly payment for the same price.
A worked example
Say you earn 60,000 a year, or 5,000 a month gross. The 28% rule caps your housing payment at about 1,400 a month. At a typical rate over 30 years, a payment of around 1,400 (before tax and insurance) supports a loan very roughly in the 200,000 to 240,000 range, and with a 20% deposit that points to a home price around 250,000 to 300,000. Change the rate, the term or your debts and the number moves, which is exactly why you should run your own figures rather than trust a single rule.
Do not forget the costs beyond the mortgage
The loan payment is only part of owning a home. Budget for property taxes, home insurance, and any homeowners' association or service fees, which together can add a meaningful amount on top of the mortgage every month. Set aside something for maintenance too, since a rough rule is that a home costs around 1% of its value a year to keep up. A payment that fits on paper but ignores these extras is how buyers end up "house poor".
How to work out your range
Start from a comfortable monthly payment, then work backward to a loan size and add your deposit. The Mortgage Calculator shows the full monthly cost including tax and insurance, so you can test different prices until the payment fits your budget.
The tools to use
Combine the Mortgage Calculator, Debt-to-Income Calculator and Down Payment Calculator to build a realistic, affordable picture. This is general information rather than financial advice.
Frequently asked questions
How much house can I afford on 60,000 a year?
At 60,000 (5,000 a month gross), the 28% rule caps the housing payment near 1,400 a month, which at a typical rate and a 20% deposit points to a home very roughly around 250,000 to 300,000. Your rate and other debts move it, so run your own numbers.
What is the 28/36 rule?
Keep your housing payment under about 28% of gross monthly income, and all debt payments under about 36%. It keeps a mortgage affordable and sits inside the 43% cap regulators use for many qualified mortgages.
How much deposit do I need?
20% avoids mortgage insurance in many countries, but lower is possible. A bigger deposit means a smaller loan and lower payments.
Do my other debts affect how much I can borrow?
Yes. Existing loans and cards raise your debt-to-income ratio, which lowers how much a lender will offer.