The Short Answer
Most lenders allow a mortgage payment up to 28% of your gross monthly income. Combined with other debts, your total shouldn’t exceed 36%. This is called the 28/36 rule.
But “what you qualify for” and “what you can comfortably afford” are different questions. Let’s break down both.
The 28/36 Rule Explained
The 28/36 rule is the standard lenders use to evaluate mortgage applications:
- 28% front-end ratio: Your total housing costs (mortgage + property taxes + insurance + HOA) shouldn’t exceed 28% of gross monthly income
- 36% back-end ratio: Your total monthly debts (housing + car payments + student loans + credit cards + other debts) shouldn’t exceed 36% of gross income
Real Example: $80,000 Salary
| Monthly Gross Income | $6,667 |
|---|---|
| Max Housing Payment (28%) | $1,867 |
| Max Total Debt (36%) | $2,400 |
| Available for non-housing debt | $533 |
With a $1,867 max payment at 6.5% interest, 20% down, and typical taxes/insurance, you’d qualify for approximately $310,000 - $340,000.
Home Affordability by Income Level
Here’s what you can typically afford at different salaries (assuming 20% down, 6.5% rate, 30-year term, and modest property taxes):
| Annual Income | Max Monthly Payment | Approximate Home Price |
|---|---|---|
| $50,000 | $1,167 | $190,000 - $220,000 |
| $75,000 | $1,750 | $290,000 - $330,000 |
| $100,000 | $2,333 | $380,000 - $430,000 |
| $125,000 | $2,917 | $480,000 - $540,000 |
| $150,000 | $3,500 | $580,000 - $650,000 |
| $200,000 | $4,667 | $770,000 - $870,000 |
Important: These are maximums, not recommendations. Many financial advisors suggest keeping housing at 25% or less of take-home pay for a more comfortable budget.
Factors That Change Your Number
What Increases Affordability
- Larger down payment: More equity = smaller loan = lower monthly payment
- Lower interest rate: Even 0.5% lower adds $20,000-$40,000 in buying power
- No other debts: All your 36% back-end ratio can go toward housing
- Higher credit score: Qualifies you for better rates (750+ is excellent)
- Low property tax area: More of your payment goes toward the actual home
What Decreases Affordability
- Existing debts: Car payment, student loans, credit card minimums all count
- Low down payment: Less than 20% adds PMI ($100-$300/month)
- High property taxes: Some areas charge 2-3% of home value annually
- HOA fees: Can be $200-$800/month in condos and planned communities
The Hidden Costs Most Buyers Forget
Your mortgage payment isn’t your only housing cost. Budget for:
- Property taxes: 0.5% - 2.5% of home value per year ($2,000 - $10,000 on a $400K home)
- Homeowner’s insurance: $1,000 - $3,000/year
- PMI (if less than 20% down): 0.5% - 1.5% of loan amount/year
- Maintenance and repairs: Budget 1% of home value per year ($4,000 on a $400K home)
- Utilities: Often higher than renting (larger space, you pay all of them)
- HOA fees: If applicable
Reality check: A $400,000 home with a $2,100 mortgage payment actually costs $2,800-$3,200/month when you include taxes, insurance, maintenance, and utilities.
A Smarter Framework: The 3x Salary Rule
A simpler approach: buy a home priced at 3x your annual household income or less. This almost always keeps you within comfortable affordability:
- $75K income → $225K home
- $100K income → $300K home
- $150K income → $450K home
This is more conservative than what a bank will approve, but it leaves room for saving, investing, and actually enjoying life.
How Down Payment Changes the Math
The size of your down payment dramatically affects both your monthly payment and total cost:
| Home Price | Down Payment | Loan Amount | Monthly Payment (6.5%, 30yr) | PMI? |
|---|---|---|---|---|
| $350,000 | 5% ($17,500) | $332,500 | $2,102 + ~$166 PMI | Yes |
| $350,000 | 10% ($35,000) | $315,000 | $1,991 + ~$131 PMI | Yes |
| $350,000 | 20% ($70,000) | $280,000 | $1,770 | No |
| $350,000 | 25% ($87,500) | $262,500 | $1,659 | No |
The 20% threshold eliminates PMI, saving $130-$170/month immediately.
First-Time Buyer Options
If 20% down feels impossible, several programs can help:
- FHA loans: 3.5% down with 580+ credit score (but lifetime mortgage insurance)
- VA loans: 0% down for veterans (no PMI, competitive rates)
- USDA loans: 0% down in eligible rural areas
- Conventional 97: 3% down with good credit (PMI drops off at 20% equity)
Pro tip: Many states offer down payment assistance programs for first-time buyers. Check your state’s housing finance agency — you might qualify for $5,000-$25,000 in grants or low-interest second loans.
The Bottom Line
- Quick estimate: Multiply your annual income by 3-4x for a comfortable purchase price
- Precise calculation: Use the 28/36 rule based on your actual debts and income
- Reality check: Add 30-50% to your mortgage payment for the true cost of ownership
- Don’t max out: Just because a bank will lend you $450K doesn’t mean you should borrow $450K
The best mortgage is one you barely notice. Stretch too far and your home becomes a source of stress instead of security.