How Much House Can I Afford? The Complete 2026 Guide
Buying a home is the biggest financial decision most people ever make. This guide explains exactly how to calculate your home buying budget, with real examples and a free calculator.
The 28/36 Rule: The Industry Standard
Lenders use the 28/36 rule to determine how much mortgage you qualify for:
- 28% Front-End Ratio: Your total housing costs (principal, interest, taxes, insurance, PMI, HOA) should not exceed 28% of your gross monthly income.
- 36% Back-End Ratio: Your total debt payments (housing + car loans + student loans + credit cards) should not exceed 36% of your gross monthly income.
Example: $100,000 Annual Income
At today's 6.5% mortgage rates, a $2,333/month housing budget can afford roughly a $350,000-$400,000 home with 20% down, depending on property taxes and insurance costs in your area.
Factors That Affect Affordability
1. Down Payment
A larger down payment reduces your loan amount and monthly payment. 20% down also eliminates PMI (Private Mortgage Insurance), which typically costs 0.5-1% of the loan amount annually.
2. Interest Rates
Every 1% increase in interest rate reduces your purchasing power by roughly 10-12%. At 6.5%, a $400,000 loan costs $2,528/month. At 5.5%, it drops to $2,271/month — a $257 difference.
3. Location & Property Taxes
Property taxes vary dramatically by state. Texas and New Jersey have rates above 2%, while Hawaii and Alabama are below 0.5%. A $400,000 home in Texas could cost $8,000/year in property taxes vs. just $2,000 in Alabama.
4. Existing Debts
Student loans, car payments, and credit card minimums all count toward your 36% back-end ratio. Paying off a $400/month car loan could increase your home buying power by $50,000+.
Try Our Free House Affordability Calculator
Enter your income, debts, and down payment to see exactly how much home you can afford.
Calculate Now →Comfortable vs. Maximum Affordability
Just because a lender approves you for $500,000 doesn't mean you should spend that much. Financial experts recommend keeping housing costs to 25% of take-home pay for a comfortable budget. This leaves room for savings, investments, and lifestyle.
Use our free house affordability calculator to see both your maximum and comfortable price ranges in seconds.