Most lenders say you can afford a house if your total housing payment is no more than 28% of your gross monthly income, and all of your debt payments together are no more than 36%. For someone earning $100,000 a year, that means a housing payment of about $2,333 a month, which at a 6.5% mortgage rate buys a home of roughly $320,000 with 10% down.
That is the lender’s view. Your own comfortable number may be lower, depending on your savings, your other goals and how steady your income is. This guide walks through both.
Quick check: put in your own price, rate and down payment in our free mortgage calculator. Canadian buyers can use our Canadian mortgage calculator, which includes CMHC insurance.
The 28/36 rule explained
Front-end ratio (28%): your monthly housing cost divided by your gross monthly income. Housing cost means principal, interest, property tax and home insurance, often shortened to PITI. Add HOA fees and mortgage insurance if you have them.
Back-end ratio (36%): housing cost plus every other debt payment, like car loans, student loans and credit card minimums, divided by gross monthly income.
Many lenders will approve you above these numbers. Conventional loans often go to a 43% to 45% back-end ratio, and FHA loans can go even higher with good credit. Being approved for it does not mean it fits your budget.
How much house can I afford on my salary?
These examples use the 28% rule, a 30-year fixed mortgage at 6.5%, about $500 a month for property tax and insurance, and 10% down. Change any of these and the answer changes.
- $60,000 a year: housing budget $1,400 a month. Loan about $142,000. Home price about $158,000.
- $100,000 a year: housing budget $2,333 a month. Loan about $290,000. Home price about $322,000.
- $150,000 a year: housing budget $3,500 a month. Loan about $475,000. Home price about $527,000.
In many cities, especially on the coasts, those prices will not buy much. That is why so many first-time buyers stretch past 28%, and why the down payment and interest rate matter so much.
The five things that decide your number
1. Your income
Lenders use gross income, before tax. They usually want two years of steady history. If you are self-employed, they use your net income from tax returns, which is often lower than people expect.
2. Your other debts
Every dollar of car payment is a dollar that cannot go to a mortgage. Paying off a $400 a month car loan before applying can raise your approved loan by around $60,000 at today’s rates. If you carry debt, start with the snowball or avalanche method.
3. Your down payment
You do not need 20% down. FHA loans need as little as 3.5% with a credit score of 580 or higher, and some conventional loans allow 3%. But with less than 20% down on a conventional loan, you pay private mortgage insurance (PMI), often 0.3% to 1.5% of the loan per year, until you reach 20% equity.
4. Your interest rate
Each percentage point matters a lot. On a 30-year loan, the monthly payment on $300,000 is about $1,800 at 6% and about $2,000 at 7%. Your rate depends on the market, your credit score, your down payment and the loan type. A score above 740 usually gets the best pricing.
5. Property tax and insurance
These vary hugely by location. Property tax can be under 0.5% of the home’s value a year in some states and over 2% in others. Home insurance has risen sharply in states with hurricane and wildfire risk. Get real quotes for the area you are looking at.
The costs people forget
- Closing costs: usually 2% to 5% of the price, paid upfront on top of the down payment.
- Maintenance: plan on about 1% of the home’s value per year. Roofs, furnaces and water heaters do not warn you.
- Utilities: a house often costs more to heat and cool than an apartment.
- Furniture and moving: easy to underestimate when you move into more space.
- An emergency fund: do not empty your savings for the down payment. Keep three to six months of expenses after closing. See how much to keep.
A comfortable number vs an approved number
A lender’s job is to approve a loan you are likely to repay. It is not their job to make sure you can still save for retirement, take a vacation or handle a job loss. Many people find that keeping housing closer to 25% of gross income, or 30% of take-home pay, leaves room to keep investing and to sleep at night.
A simple test: for three to six months before you buy, pay yourself the difference between your current rent and your expected total housing cost. Put it in a high yield savings account. If that feels tight, the house will too, and you will have added to your down payment either way.
Should you rent or buy?
Buying usually makes sense if you plan to stay at least five years, have a stable income and have your emergency fund in place. Selling a home costs around 6% to 10% when you add agent fees and moving costs, so short stays rarely pay off. If you are likely to move for work or are unsure about the city, renting and investing the difference can come out ahead.
Check what you can afford each month with our budget calculator.
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Frequently asked questions
How much house can I afford with $70,000 a year?
Using the 28% rule, about $1,630 a month for housing. With the same assumptions as above, that is a loan of roughly $180,000 and a home around $200,000 with 10% down. Lower debts, a bigger down payment or a lower rate push that higher.
Is the 3x salary rule still useful?
It is a rough check. Spending about three times your income on a home was more realistic when rates were low. At higher rates, the 28/36 rule and a full payment estimate give a more accurate answer.
Does a bigger down payment always help?
It lowers your payment and removes PMI at 20%. But keep enough cash for closing costs, repairs and emergencies. A slightly smaller down payment with a solid cushion is safer than a bigger one with nothing left.
Should I get a 15 or 30-year mortgage?
A 15-year loan has a lower rate and saves a lot of interest, but the monthly payment is much higher. A 30-year loan keeps the payment flexible. Run both in the mortgage calculator to see the difference.
This article is general information, not financial advice. Lending rules differ by lender and country, so talk to a lender or mortgage broker for your own numbers.
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