How Much House Can I Afford?

We use the 28/36 rule, the same guideline most lenders follow:

• 28% front-end ratio: Your monthly housing payment (mortgage + taxes + insurance) should not exceed 28% of your gross monthly income.
• 36% back-end ratio: Your total monthly debts (housing + car payments + student loans + credit cards) should not exceed 36% of gross monthly income.

We take the more conservative of these two limits. Your credit score determines the mortgage rate (from 6.25% for excellent credit to 8.5% for below 660), which directly affects how much home the same monthly payment can buy.

Monthly costs include: principal & interest on a 30-year fixed mortgage, property tax (1.1% of home value), and homeowner’s insurance (0.35%). We do not include HOA fees, PMI, or maintenance in the affordability calculation, though real costs will vary.

How much house can I afford on a $75K salary? With $500/month in debts and 20% down at a 6.75% rate, roughly $300K. That covers the typical home in about 30 states but falls short in high-cost states like California ($756K) and Massachusetts ($639K).

What if I only put 5% down? A smaller down payment means a larger loan and higher monthly payments. You’ll also need to pay PMI (private mortgage insurance), which adds 0.5-1.5% of the loan per year. This calculator shows the base case — with PMI, your actual budget would be lower.

Does this account for property tax differences by state? We use a national average of 1.1%. In practice, property tax rates vary widely — from 0.31% in Hawaii to 2.47% in New Jersey. States with high property taxes effectively reduce how much home you can afford there.

Should I spend the maximum I can afford? Generally, no. The 28/36 rule is a ceiling, not a target. Financial advisors often recommend spending less to maintain a buffer for emergencies, home repairs, and lifestyle flexibility. Just because you can buy a $350K home doesn’t mean you should.