The Honest Answer for 2026
Updated: 08.14.2026
What a lender will approve and what you can comfortably afford are two very different numbers. Lenders approve the maximum they’re willing to risk. You have to live with the payment.
Short version: most people can afford a home priced at roughly 3-4 times their annual income, but the more precise answer comes from the 28/36 rule, no more than 28% of gross income toward housing, no more than 36% toward all debt combined. That number is almost always lower than what a lender will actually approve you for, and the gap between those two figures is exactly what you need to know before you start shopping.
Here’s how to figure out your real number, not just the one that gets you approved.
The Rule of Thumb That Actually Works
Most people can afford a home priced at roughly 3-4 times their annual gross income, assuming moderate debt, decent credit, and at least 5% down.
$60,000/year income → $180,000-$240,000 home. $100,000/year income → $300,000-$400,000 home. $150,000/year income → $450,000-$600,000 home.
This is a starting point, not a final answer. Your debt load, down payment, local property taxes, and interest rate all shift the number significantly.
The 28/36 Rule: How Lenders Think About It
The 28/36 rule suggests no more than 28% of your gross monthly income should go toward housing expenses, and no more than 36% toward total monthly debt.
Housing expenses include: mortgage principal and interest, property taxes, homeowners insurance, and HOA fees if applicable.
Total debt includes all of the above plus car payments, student loans, credit card minimums, and any other monthly debt obligations.
The math in practice:
If your household earns $8,000/month before taxes: maximum housing payment is $2,240 (28%), maximum total debt including housing is $2,880 (36%). If you already pay $600/month in car and student loans, your maximum mortgage payment drops to $2,280.
Run this calculation with your actual numbers before you talk to a lender. It tells you what’s comfortable, not just what’s approved. If you’d rather not do this math by hand, the house affordability calculator runs it for you automatically, and shows you a second, looser number too, more on that below.
What Your Monthly Payment Actually Includes
Most people focus on the mortgage payment. The real monthly cost of homeownership is significantly higher:
PITI, the four components of a standard mortgage payment: Principal, paying down the loan balance. Interest, the lender’s fee for the money. Taxes, property taxes, collected monthly and held in escrow. Insurance, homeowners insurance, also escrowed.
On a $400,000 home with 10% down at 7% interest, principal and interest alone are roughly $2,395/month. Add property taxes (varies widely by state and county, average around $300-500/month on a $400,000 home) and insurance ($150-200/month) and you’re looking at $2,845-$3,095/month before utilities or maintenance.
Budget 1-2% of your home’s value annually for maintenance. On a $400,000 home that’s $4,000-$8,000 per year, $333-$667/month.
The full picture on a $400,000 purchase: plan for $3,200-$3,800/month in true housing costs. That’s the number to test against the 28% rule, not just the mortgage payment.
How Down Payment Affects Affordability
The size of your down payment affects your monthly payment, your loan eligibility, and whether you pay PMI.
| Down Payment | Amount (on $350k home) | Monthly PMI | Notes |
|---|---|---|---|
| 3% | $10,500 | ~$175/mo | Conventional minimum |
| 3.5% | $12,250 | ~$170/mo | FHA minimum |
| 10% | $35,000 | ~$90/mo | PMI reduces |
| 20% | $70,000 | $0 | PMI eliminated |
PMI is a fee charged on many conventional loans when the down payment is under 20%. It increases your monthly payment until you reach a required level of home equity. PMI typically costs 0.5-1.5% of the loan amount annually, on a $315,000 loan that’s $1,575-$4,725/year, or $131-$394/month.
Putting 20% down eliminates PMI and meaningfully reduces your monthly payment, but tying up that much cash isn’t always the right call. Weigh the PMI cost against the opportunity cost of not investing that money elsewhere. Once you have a specific loan amount in mind, the mortgage calculator will show you exactly when PMI drops off based on your real numbers, not just a general estimate.
Interest Rate Impact: This Is Huge
Small rate differences have enormous long-term impact. On a $350,000 mortgage:
| Rate | Monthly Payment | Total Interest Over 30 Years |
|---|---|---|
| 6.5% | $2,213 | $447,000 |
| 7.0% | $2,329 | $488,000 |
| 7.5% | $2,447 | $531,000 |
That’s an $84,000 difference between 6.5% and 7.5% on the same house. As of now, the average 30-year rate sits right around 6.7-6.8%, squarely in the middle of that range, which is exactly why shopping around with at least three lenders or a mortgage broker matters. A few hours of comparison shopping is worth more than almost any other step in the process.
Use Bankrate to compare current mortgage rates across multiple lenders in your area.
The Honest Affordability Test
Beyond the math, ask yourself these questions honestly:
After the mortgage payment, taxes, insurance, and maintenance, can I still save for retirement? If the answer is no, the house is too expensive. Homeownership is a good financial decision but not at the expense of retirement savings.
What happens if one income disappears? If you have two incomes and the math only works with both, you’re exposed. Job loss, illness, or a family change can make an affordable home suddenly unaffordable.
Am I stretching because the market is competitive? Just because you qualify for a certain loan amount doesn’t mean the monthly payment will feel comfortable once additional expenses are factored in. The pressure of a hot market can push buyers to overcommit. The house that stretches your budget to the limit is a house that owns you.
Have I actually confirmed buying beats renting for my specific timeline? Affordability tells you what you could pay. It doesn’t tell you whether paying it is the better financial move compared to renting and investing the difference, that’s a separate question with its own math, run through the rent vs. buy calculator if you haven’t already.
A Practical Starting Point
Rather than plugging your numbers into a generic online calculator and manually subtracting a safety margin yourself, the house affordability calculator does that comparison directly: it shows you two real numbers side by side, a conservative figure built on the 28/36 rule that leaves genuine breathing room, and a looser figure closer to what a lender might actually approve based on a higher debt-to-income ceiling. The gap between those two numbers, shown in real dollars, is usually more revealing than either number on its own.
That’s the affordability side. If you haven’t already settled whether buying makes more financial sense than renting in the first place, the rent vs. buy calculator runs that comparison directly, cash paid versus equity built, over whatever timeline you’re actually considering.
Once you’ve got a target price range from that, the mortgage calculator shows you the real monthly payment for that price, including taxes, insurance, and PMI if it applies, not just the loan payment alone.
Leave yourself room for the unexpected, because homeownership always has something unexpected waiting.
Related: How to Buy Your First House – A Step-by-Step Guide for 2026
Frequently Asked Questions
Lenders are underwriting the risk that you’ll pay them back, typically approving up to around 43% of your gross income toward debt. The 28/36 rule most financial advisors recommend is stricter, leaving room for savings, emergencies, and everything else life throws at you. Both are real numbers, they just answer different questions.
Roughly 3-4 times your annual gross income, assuming moderate debt, decent credit, and at least 5% down. This is a rough starting point, your actual debt load, down payment size, and local property taxes will shift the real number meaningfully.
Typically 0.5-1.5% of the loan amount annually, which works out to roughly $90-$400 a month depending on your down payment and loan size. It disappears entirely once you reach 20% equity, either through a 20% down payment upfront or by paying down the loan over time.
Yes, absolutely. Principal and interest alone significantly understate your real monthly cost. On a $400,000 home, taxes and insurance can add $450-$700 a month on top of the loan payment itself, and that’s before maintenance.
A common rule of thumb is 1-2% of your home’s value annually. On a $400,000 home, that’s $4,000-$8,000 a year, or roughly $333-$667 a month, on top of your mortgage payment.
Sources
Current 30-year mortgage rate average: Freddie Mac PMMS, Bankrate