How Much House Can I Afford on My Salary?

Most buyers can afford a home priced 3–5× their gross annual income — but the real number depends on four things: your income, your existing debts, your down payment, and the current interest rate. On a $80,000 salary with $500/month in other debts and a $40,000 down payment at 6.5%, most lenders will approve you for a home in the $320,000–$340,000 range. On the same salary with no debts and a larger down payment, that number climbs significantly higher. Here’s exactly how lenders calculate it — and how to push your number as high as possible.

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Try It: Home Affordability Calculator

The fastest way to get your number is to plug in your own figures. The calculator below is pre-filled with the article’s worked example — $80,000 salary, $500/month in other debts, $40,000 down payment at 6.5%. Edit any field to see how it shifts the affordable price:

Got your number? Here’s exactly how it’s calculated — and what you can do to increase it.

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The Rule Lenders Actually Use: The 28/36 Rule

When a lender decides how much mortgage to approve you for, they’re not guessing. They apply a standardized formula called the 28/36 rule — and understanding it gives you enormous power as a buyer.

The Front-End Ratio (28%)

Your monthly housing payment — everything that goes to the lender and your escrow account — cannot exceed 28% of your gross monthly income. This payment is called PITI: Principal, Interest, property Tax, and homeowner’s Insurance.

Here’s what that looks like on a real salary:

• $80,000/year ÷ 12 months = $6,667 gross monthly income
• $6,667 × 28% = $1,867 maximum monthly housing payment

That $1,867 isn’t just your mortgage — it includes property tax and insurance too. On a home with a 1.2% annual property tax rate and 0.5% insurance rate, those two items alone add roughly $400–$500/month, which means your actual mortgage payment budget is closer to $1,350–$1,450.

The Back-End Ratio (36%)

The second rule looks at your total monthly debt load — housing plus every other recurring debt payment — and says it cannot exceed 36% of your gross monthly income.

Using the same $80,000 salary:

• $6,667 × 36% = $2,400 maximum total monthly debt

If you currently pay $500/month in car loans, student loans, and credit card minimums, your maximum housing payment drops to $2,400 − $500 = $1,900/month. That’s the back-end rule kicking in.

Which Rule Limits You?

Whichever ceiling is lower is the one that constrains you:

• Little or no other debt → the front-end 28% limit is usually what caps you
• Significant other debt → the back-end 36% limit kicks in first and directly reduces your home budget

This is the single most important insight for buyers with existing debt: paying off a car loan or credit card before applying for a mortgage can meaningfully increase the home price you qualify for. Every $100/month in debt you eliminate adds roughly $10,000–$15,000 to your approved home price.

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How Much House Can You Afford by Salary?

To give you a quick reference point, here are estimated affordable home prices across common salary ranges. These assume 20% down, a 6.5% interest rate, 1.2% annual property tax, 0.5% insurance, and no other monthly debts.

Annual Salary	Max Monthly Payment (28%)	Estimated Affordable Home Price
$50,000	$1,167	~$180,000–$210,000
$60,000	$1,400	~$220,000–$255,000
$75,000	$1,750	~$270,000–$315,000
$80,000	$1,867	~$290,000–$340,000
$100,000	$2,333	~$360,000–$420,000
$120,000	$2,800	~$430,000–$505,000
$150,000	$3,500	~$540,000–$630,000
$200,000	$4,667	~$720,000–$840,000

Important: These are estimates for a buyer with no other debts and a 20% down payment. Your number will shift — sometimes significantly — based on your debts, credit score, and down payment. Use the Home Affordability Calculator with your exact figures for a personalized result.

Also note the ranges: the spread between the low and high estimate on each row is driven by local property tax rates. A buyer in New Jersey (2.5% property tax) and a buyer in Hawaii (0.3% property tax) earning the same salary can afford very different home prices — even at the same mortgage rate.

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What Actually Determines How Much House You Can Afford

Four variables drive your affordability number. Improving any one of them moves the ceiling.

Your Income

Lenders use your gross income — the number before taxes and deductions, not your take-home pay. This distinction matters: the 28% limit applied to gross income translates to roughly 35–40% of your actual after-tax income, which is why the lender’s maximum can feel tight in real life.

A few income nuances worth knowing:

• Buying with a partner? Both incomes count, and the combined figure can dramatically increase what you qualify for. Two people each earning $60,000 ($120,000 combined) qualify for nearly twice the home of a single $60,000 earner.
• Self-employed? Lenders typically average your last two years of tax returns — and they use your net income after business deductions, not your revenue. If your Schedule C shows $80,000 in revenue but $60,000 in net income, lenders use $60,000.
• Bonuses and overtime? Some lenders count these if they’re documented and consistent over two or more years. Others use base salary only. Ask your lender upfront.

Your Other Debts

This is where most buyers’ affordability calculations go wrong. People estimate based on their salary, forget about their existing debts, and then get a lower pre-approval than expected.

Every $100/month in existing debt — car payments, student loan minimums, credit card minimum payments — reduces your affordable home price by roughly $10,000–$15,000. Here’s why that matters in practice:

• A $400/month car payment effectively removes $40,000–$60,000 from your home budget
• $300/month in student loan payments costs you $30,000–$45,000 in home buying power
• Credit card minimums of $150/month reduce your ceiling by $15,000–$22,000

The math is stark. A buyer with $800/month in total other debts on a $100,000 salary can afford roughly $80,000–$100,000 less home than a buyer with zero other debts at the same income.

Your Down Payment

A larger down payment increases what you can afford in three ways simultaneously:

1. Smaller loan — less borrowed means a lower monthly payment, which lets the same income support a higher purchase price
2. No PMI — below 20% down, conventional lenders add private mortgage insurance, typically $100–$300/month, which eats directly into your payment budget
3. Better rate — buyers with larger down payments often qualify for slightly better interest rates, further improving affordability

The difference between a 5% and 20% down payment on a $350,000 home isn’t just the $52,500 in extra cash — it’s also the elimination of roughly $150–$200/month in PMI, which over 7 years until you’d naturally reach 20% equity represents $12,600–$16,800 in additional cost.

Interest Rate

Of all the variables buyers worry about, the interest rate has the largest single impact on affordability — and it’s the one they have the least direct control over.

At the same monthly payment budget of $1,500 for principal and interest:

• At 5.0% → you can afford a loan of approximately $279,000
• At 6.5% → you can afford a loan of approximately $237,000
• At 7.5% → you can afford a loan of approximately $214,000

That’s a $65,000 swing in loan amount — and home price — between a 5% and 7.5% rate, with the exact same payment. On a combined income, this gap becomes even more dramatic.

What you can control is your credit score, which directly affects the rate lenders offer you. The difference between a 680 and 760 credit score can be 0.5–1.0% in interest rate, which on a $300,000 loan translates to $90–$180/month.

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The Lender’s Maximum Is Not Your Target

Here’s the piece of advice that most affordability guides don’t say clearly enough: the number a lender approves you for is a ceiling, not a recommendation.

At 28% of gross income, your housing payment takes up roughly 35–40% of your actual take-home pay. That leaves the rest of your monthly income to cover groceries, utilities, transportation, childcare, healthcare, retirement savings, and an emergency fund. For many buyers, that math gets tight fast.

Consider two buyers both earning $100,000:

Buyer A spends at the 28% lender maximum:

• Monthly housing: $2,333
• Monthly take-home (est. after tax): ~$6,200
• Housing as % of take-home: 37.6%
• Left for everything else: $3,867

Buyer B targets 22% of gross income instead:

• Monthly housing: $1,833
• Monthly take-home: ~$6,200
• Housing as % of take-home: 29.6%
• Left for everything else: $4,367

The $500/month difference — about $50,000 less in home price — gives Buyer B $6,000 more per year for retirement contributions, emergency savings, or simply not feeling house-poor every month.

A useful gut check before committing to any home price: “At this payment, can I still max out my retirement contributions, absorb a $5,000 emergency repair without going into debt, and survive a 3-month job loss without losing the house?” If the answer is no, the lender’s maximum is higher than your personal maximum.

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The Costs Most First-Time Buyers Forget

The monthly payment isn’t the only number that matters. Several significant costs catch first-time buyers off guard, and missing them can derail a purchase entirely.

Closing Costs: 2–5% of the Purchase Price

Closing costs are one-time fees paid at the closing table — completely separate from your down payment. They cover loan origination, the appraisal, title insurance, property tax escrow, homeowner’s insurance prepayment, and various government fees.

On a $350,000 home, closing costs typically run $7,000–$17,500. This cash is due at signing, in addition to your down payment. A buyer planning a $70,000 down payment (20%) needs to budget at least $77,000–$87,500 in total cash.

Property Tax: Varies Enormously by Location

Property tax is already included in lender affordability calculations — it’s the T in PITI — but many buyers underestimate how much it varies by location and how significantly it affects their payment.

• New Jersey: avg ~2.5% annually → $8,750/year ($729/month) on a $350,000 home
• Illinois: avg ~2.1% annually → $7,350/year ($613/month)
• Texas: avg ~1.7% annually → $5,950/year ($496/month)
• California: avg ~0.73% annually → $2,555/year ($213/month)
• Hawaii: avg ~0.28% annually → $980/year ($82/month)

The same $350,000 home costs $647/month more in property tax in New Jersey than in Hawaii. That difference alone shifts the affordable home price by $60,000–$80,000 between high and low tax states.

Maintenance: Budget 1% Per Year

Lenders don’t ask about maintenance costs, and they don’t include them in affordability calculations. But homes break — roofs, HVAC systems, appliances, plumbing. The widely-cited rule of thumb is to budget 1% of your home’s value per year for maintenance and repairs.

On a $350,000 home that’s $3,500/year — or $292/month — that comes entirely out of your personal budget, not the lender’s calculation. Buyers who stretch to the lender maximum often have no room for this, which is how deferred maintenance spirals into larger problems.

HOA Fees: $0 to $600+ Per Month

If you’re buying a condo, townhouse, or home in a managed community, the homeowners association fee is a real monthly cost — and it counts toward your front-end DTI ratio. A $400/month HOA fee on a $100,000 salary reduces your available mortgage payment budget by $400, which can lower your approved home price by $50,000–$60,000.

Always ask for the HOA fee schedule before falling in love with a property.

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Not Sure Whether to Buy at All? Run This First

Home affordability and home readiness aren’t the same thing. If you’re still deciding whether buying makes financial sense for your situation — especially if you might move within five years — the more important question is how buying compares to continuing to rent.

Buying carries large upfront costs (down payment + closing costs) that only pay off if you stay long enough. The year at which buying becomes cheaper than renting is called the break-even point — and it varies significantly based on your local market, the current mortgage rate, and how fast rents are rising.

If the break-even in your area is 7 years and you’re planning to stay for 10, buying is likely the right financial call. If the break-even is 7 years and you’re uncertain beyond 3, renting is the lower-risk choice — even if you can technically afford to buy.

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Ready to Find Your Number?

The estimates in this article are a starting point — your real number depends on your specific income, debts, down payment, location, and current rates. The most accurate way to find it is to use the calculator.

Once you have your affordable home price, here are the logical next steps:

• → Mortgage Calculator — See the full monthly payment breakdown (PITI) at your home price
• → Down Payment Calculator — Calculate exactly how long it takes to save your down payment
• → Closing Costs Calculator — Estimate the total cash you’ll need on closing day
• → Rent vs Buy Calculator — Compare the true cost of buying vs renting over your planned time horizon

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Calcerra calculators use the lender 28/36 rule, current standard mortgage formulas, and national-average cost estimates. Results are estimates for planning purposes — get pre-approved by a lender for the figures you can rely on when making an offer.