How Much House Can I Afford?

What Does "How Much House Can I Afford" Actually Mean?

How much house you can afford depends on your gross income, existing debts, down payment, interest rate, and loan term. Most lenders use the 28/36 rule: your monthly housing costs should not exceed 28% of your gross monthly income, and your total debt payments should stay below 36%.

The 28/36 Rule Explained

The "28" in the 28/36 rule is your front-end ratio. It means your total monthly housing cost - mortgage principal and interest, property taxes, homeowners insurance, and any HOA dues - should not exceed 28% of your gross monthly income. If you earn $6,000 per month before taxes, that cap is $1,680.

The "36" is your back-end ratio, also called your debt-to-income ratio (DTI). This includes your housing payment plus all other monthly debt obligations: car payments, student loans, credit card minimums, and child support. Using the same $6,000 monthly income, your total debts should stay under $2,160.

These aren't hard limits for every program. FHA loans allow DTI ratios up to 50% in some cases, and VA loans use a residual income test that can be more flexible than a strict DTI cutoff. But 28/36 is the starting point most lenders use, and it's what this calculator applies.

Factors That Affect How Much Home You Can Buy

Credit score directly impacts your interest rate. A buyer with a 760 score might get a rate 0.5-1% lower than a buyer with a 660 score on the same loan. On a $300,000 mortgage, that difference adds up to $100-200 per month and $36,000-72,000 over 30 years. Higher scores mean more purchasing power.

Interest rate changes your affordability more than most people expect. A 0.5% rate increase on a $300,000 loan adds roughly $90 to your monthly payment. In a rising rate environment, getting pre-qualified sooner rather than later lets you lock in before rates climb further.

Down payment affects both your loan amount and whether you pay private mortgage insurance (PMI). Putting 20% down eliminates PMI, which can save $100-300 per month. But most buyers don't put 20% down, and that's fine - programs like conventional loans (3% down), FHA (3.5%), and USDA/VA (0%) make homeownership accessible with less savings.

Property taxes and insurance vary by location and eat into your monthly budget. North Carolina property tax rates are generally moderate, while Florida has no state income tax but property taxes and insurance - especially wind and flood coverage - can be significant in coastal areas.

How to Increase How Much House You Can Afford

The most direct way to increase your buying power is to reduce existing debts before applying. Paying off a $300/month car loan frees up $300 in your DTI, which translates to roughly $45,000-50,000 more in home purchasing power.

Improving your credit score to qualify for a lower rate is another high-impact move. Even going from 680 to 740 can drop your rate enough to add $20,000-30,000 to your affordable price range. Saving a larger down payment reduces the loan amount and can eliminate PMI.

You can also consider a longer loan term (30 years vs. 15) to lower monthly payments, or explore low-down-payment programs: FHA at 3.5%, VA at 0%, or conventional at 3% for first-time buyers. A free pre-qualification confirms exactly what you can afford based on your full financial picture.

Written by Cole Brantley, NMLS# 1905939 | Mortgage Loan Originator, Mpire Financial LLC | Updated February 2026