How much house can I afford on my income?
As people ask it
I make about $85,000 a year and pay $400 a month on a car loan. How do I figure out how much house I can actually afford, not just what a lender will approve?
The short answer
Start with the monthly payment you can live with, not the price. Many buyers keep the full house payment (loan, taxes, insurance, mortgage insurance) near 28% of gross monthly income and all debts near 36%. Lenders may approve more, up to 43–50% on some loans, but that is a ceiling, not a target. Then turn that payment into a price using your rate and down payment.
Key takeaways
- Debt-to-income ratio (DTI) is your monthly debt payments divided by your gross monthly income, and it is the main number lenders use to size your loan.
- A common budgeting rule keeps housing near 28% of gross income and total debts near 36%, which is more cautious than most lender maximums.
- Fannie Mae allows a total DTI of up to 50% on loans run through its Desktop Underwriter system, and up to 36% (or 45% with strong credit and savings) when underwritten by hand.
- FHA's manual underwriting starts at 31% for housing and 43% for total debt, with room for more only when the borrower has compensating factors.
- At an example rate of 6.5%, a $1,483 principal-and-interest payment supports a loan of about $234,600; at 7.5% the same payment supports only about $212,100.
- Your real limit should also leave room for closing costs, repairs, savings and the life you want to keep living after you move in.
Run your own numbers with our Home Affordability Calculator.
In this answer
How much house can I afford? The honest answer is: the price that keeps your full monthly housing payment at a level you can pay every month, even in a bad month, while you keep saving. For many buyers that means a house payment near 28% of gross income and total debts near 36%. Lenders may approve more than that, but their number is a ceiling, not a target.
This guide shows you how to turn your income, debts, down payment and interest rate into a realistic price range. You will see the limits lenders actually use, a worked example, and the costs people often forget.
What decides how much house you can afford?
Four things decide it: your gross income, the monthly debts you already pay, the cash you can put down, and the interest rate on the loan. Income and debts set the monthly payment you can carry. The rate and down payment turn that payment into a price.
The Consumer Financial Protection Bureau (CFPB) suggests you track your spending first so you know what monthly payment you can handle. It also points out that the rate you expect to get helps decide how much to spend on a home. That is why this guide starts with the payment, not the price.
Here is what feeds into your number:
- Gross monthly income: your pay before taxes and deductions. Lenders use this figure.
- Existing monthly debts: car loans, student loans, minimum credit card payments, personal loans and child support.
- Down payment and savings: the cash you bring to closing, plus what you keep in reserve afterward.
- Interest rate and loan term: a lower rate or longer term means a lower payment for the same loan.
- Taxes, insurance and dues: property tax, homeowners insurance, HOA dues and any mortgage insurance are part of the monthly payment too.
How do lenders use your debt-to-income ratio?
Lenders add your proposed house payment to your other monthly debts and divide by your gross monthly income. If the result is under their limit, you pass that test. Limits differ by loan type and by whether a computer system or a person underwrites the loan.
The CFPB’s own example shows how simple the math is. Someone with a $1,500 mortgage payment, a $100 car payment and $400 of other debts pays $2,000 a month. With $6,000 of gross monthly income, their DTI is 33%.
The CFPB also notes that different loan products and lenders set different DTI limits. Here are some of the published ones:
| Loan type and underwriting | Housing payment limit | Total DTI limit |
|---|---|---|
| Fannie Mae, manually underwritten | No separate limit stated | 36%, or up to 45% with required credit score and reserves |
| Fannie Mae, Desktop Underwriter (automated) | No separate limit stated | Up to 50% |
| FHA, manually underwritten, no compensating factors | 31% | 43% |
| FHA, manually underwritten, with compensating factors | Up to 40% | Up to 50% |
The Fannie Mae figures come from its Selling Guide section on debt-to-income ratios. The FHA figures come from HUD’s Single Family Housing Policy Handbook 4000.1, which lists ratios of 31/43, 37/47 and 40/50 depending on the borrower’s credit score and compensating factors. Compensating factors are strengths like extra savings or a very small payment increase.
Lenders must also follow the federal ability-to-repay rule. Under it, a lender has to consider either your DTI or the income you have left over after paying your debts, which the CFPB explains on its Qualified Mortgage page.
What is the 28/36 rule, and should you follow it?
The 28/36 rule is a traditional budgeting guide. It says to keep your full housing payment at or below 28% of gross monthly income and your total debts at or below 36%. It is not a law or a loan rule, but it is a sensible starting point for a payment you can live with.
Why use a stricter number than lenders do? Because lenders use gross pay, and you pay your bills from take-home pay. After taxes, health insurance and retirement savings, 28% of gross pay can easily be 35% or more of what lands in your bank account.
Treat 28/36 as a comfort zone:
- Below 28/36: more room to save, pay down debt and handle repairs.
- Around 28/36: a balanced budget for most households with steady income.
- Well above 28/36: possible to get approved, but only sensible if you have strong savings, stable income and few other goals.
How do you turn a monthly payment into a home price?
Work backward in four steps. Find the house payment you are comfortable with, subtract the parts that are not principal and interest, then use your rate to find the loan amount that payment supports. Finally, add your down payment to get a price.
- Pick your housing budget. Multiply gross monthly income by 28%, then check that housing plus other debts stays near 36%. Use the lower result.
- Subtract taxes, insurance and other costs. Get local estimates for property tax, homeowners insurance, HOA dues and mortgage insurance.
- Convert the rest to a loan amount. The amount left is your principal-and-interest budget. A mortgage calculator from a government or housing counseling source, or your lender, can turn that into a loan amount at a given rate.
- Add your down payment. Loan amount plus down payment equals your approximate price ceiling. Then keep cash aside for closing costs.
This example is hypothetical. Your taxes, insurance and mortgage insurance will depend on where you buy and on your credit, so get real local quotes before you settle on a number.
- Principal and interest $1,483 (74.79%)
- Taxes and insurance (example) $400 (20.17%)
- Mortgage insurance (example) $100 (5.04%)
View data as table
| Item | Value | % |
|---|---|---|
| Principal and interest | $1,483 | 74.79% |
| Taxes and insurance (example) | $400 | 20.17% |
| Mortgage insurance (example) | $100 | 5.04% |
Source: Mortgage Advice Daily calculation (worked example) (as of October 18, 2026). Worked example, not a quote
How much does the interest rate change what you can afford?
A lot. The same monthly payment buys a smaller loan when rates rise. In our example, a one-point change in the rate moves the price range by roughly $24,000 to $28,000 in either direction, even though the buyer’s income has not changed at all.
These are example rates for illustration only, not current market rates. For current national averages, check Freddie Mac’s weekly Primary Mortgage Market Survey, which is released on Thursdays.
| Example rate (30-year fixed) | Loan a $1,483 principal-and-interest payment supports | Approximate price with 5% down |
|---|---|---|
| 5.5% | $261,200 | $274,900 |
| 6.5% | $234,600 | $247,000 |
| 7.5% | $212,100 | $223,300 |
Two lessons come out of this table. First, compare offers from several lenders, because even a small rate difference changes your price range. Second, do not plan on refinancing later to make an unaffordable payment work. Rates may not fall, and refinancing has its own costs.
View data as table
| Loan amount | |
|---|---|
| 5.5% | $261,189 |
| 6% | $247,352 |
| 6.5% | $234,627 |
| 7% | $222,906 |
| 7.5% | $212,095 |
Source: Mortgage Advice Daily calculation (worked example) (as of October 18, 2026). Worked example, not a quote
- 30-year fixed
- 15-year fixed
View data as table
| Week of | 30-year fixed | 15-year fixed |
|---|---|---|
| October 16, 2025 | 6.27% | 5.52% |
| October 23, 2025 | 6.19% | 5.44% |
| October 30, 2025 | 6.17% | 5.41% |
| November 6, 2025 | 6.22% | 5.5% |
| November 13, 2025 | 6.24% | 5.49% |
| November 20, 2025 | 6.26% | 5.54% |
| November 26, 2025 | 6.23% | 5.51% |
| December 4, 2025 | 6.19% | 5.44% |
| December 11, 2025 | 6.22% | 5.54% |
| December 18, 2025 | 6.21% | 5.47% |
| December 24, 2025 | 6.18% | 5.5% |
| December 31, 2025 | 6.15% | 5.44% |
| January 8, 2026 | 6.16% | 5.46% |
| January 15, 2026 | 6.06% | 5.38% |
| January 22, 2026 | 6.09% | 5.44% |
| January 29, 2026 | 6.1% | 5.49% |
| February 5, 2026 | 6.11% | 5.5% |
| February 12, 2026 | 6.09% | 5.44% |
| February 19, 2026 | 6.01% | 5.35% |
| February 26, 2026 | 5.98% | 5.44% |
| March 5, 2026 | 6% | 5.43% |
| March 12, 2026 | 6.11% | 5.5% |
| March 19, 2026 | 6.22% | 5.54% |
| March 26, 2026 | 6.38% | 5.75% |
| April 2, 2026 | 6.46% | 5.77% |
| April 9, 2026 | 6.37% | 5.74% |
| April 16, 2026 | 6.3% | 5.65% |
| April 23, 2026 | 6.23% | 5.58% |
| April 30, 2026 | 6.3% | 5.64% |
| May 7, 2026 | 6.37% | 5.72% |
| May 14, 2026 | 6.36% | 5.71% |
| May 21, 2026 | 6.51% | 5.85% |
| May 28, 2026 | 6.53% | 5.87% |
| June 4, 2026 | 6.48% | 5.79% |
| June 11, 2026 | 6.52% | 5.84% |
| June 18, 2026 | 6.47% | 5.81% |
| June 25, 2026 | 6.49% | 5.84% |
| July 2, 2026 | 6.43% | 5.79% |
| July 9, 2026 | 6.49% | 5.82% |
| July 16, 2026 | 6.55% | 5.93% |
| July 23, 2026 | 6.58% | 5.96% |
| July 30, 2026 | 6.66% | 6.04% |
| August 6, 2026 | 6.69% | 6.01% |
| August 13, 2026 | 6.67% | 5.96% |
| August 20, 2026 | 6.65% | 5.95% |
| August 27, 2026 | 6.66% | 5.98% |
| September 3, 2026 | 6.71% | 6.04% |
| September 10, 2026 | 6.76% | 6.09% |
| September 17, 2026 | 6.95% | 6.26% |
| September 24, 2026 | 7.03% | 6.42% |
| October 1, 2026 | 7.28% | 6.6% |
| October 8, 2026 | 7.4% | 6.73% |
| October 15, 2026 | 7.4% | 6.71% |
Source: Freddie Mac Primary Mortgage Market Survey (via FRED) (as of October 15, 2026).
What other costs should you budget for?
Beyond the mortgage payment, budget for cash at closing, an emergency fund, ongoing maintenance and changes to utilities and commuting. These costs do not show up in your DTI, but they decide whether owning a home feels comfortable or stressful.
Cash you need at closing
You need your down payment plus closing costs, such as lender fees, title charges and prepaid taxes and insurance. Your Loan Estimate, which a lender must give you within three business days of your application, lists these. Our guides on how much down payment you need and how much closing costs are go deeper.
Savings left after you move in
Do not empty your accounts to buy. Some loan programs require reserves, which is money left over after closing. Even when they do not, you want a cushion for job changes, medical costs and repairs.
Ongoing ownership costs
- Maintenance and repairs: roofs, furnaces, water heaters and appliances wear out.
- Utilities: a larger home or an older one can cost more to heat and cool.
- Property tax and insurance increases: both can rise over time, which raises your monthly escrow payment.
- HOA dues and special assessments: condo and planned communities can raise dues or charge one-time fees.
How do your down payment and loan type affect your budget?
A bigger down payment lowers your loan amount and can reduce or remove mortgage insurance, so the same monthly budget stretches to a higher price. Your loan type matters too, because FHA and conventional loans price mortgage insurance differently and set different limits on loan size.
Mortgage insurance protects the lender if you stop paying. On a conventional loan with less than 20% down, you usually pay private mortgage insurance (PMI). On an FHA loan, you pay an upfront and an annual mortgage insurance premium. Our comparison of FHA vs. conventional loans explains which tends to cost less for different buyers, and our guide on when you can remove PMI covers how to drop that cost later.
Loan size limits can also cap your price. For 2026, the baseline conforming loan limit for a one-unit home is $832,750 in most of the country and up to $1,249,125 in high-cost areas. FHA’s 2026 limits for one unit run from $541,287 in lower-cost areas to $1,249,125 in high-cost areas. Most first-time buyers are well under these limits, but in expensive markets they matter.
How does your credit score fit in?
Your credit score does not change your DTI, but it affects your interest rate and mortgage insurance cost, and both change your monthly payment. A higher score can mean a lower payment for the same loan, which raises the price you can comfortably afford.
The CFPB advises reviewing your credit reports early so you have time to fix mistakes before you apply. If your score is on the lower end, see our guide on buying a house with a 620 credit score for what to expect and how to prepare.
What should you do next?
Set your own payment limit first, then confirm it with a lender. Your comfort number should come from your real budget and savings goals, not from the largest approval you can get. Work through these steps in order, and you will walk into a preapproval knowing your own ceiling. Here is a simple plan:
- Write down your numbers. List your gross monthly income, every monthly debt payment and the cash you have for a down payment and closing costs.
- Find your comfort payment. Use 28% of gross income as a starting point, then check it against your take-home pay and real monthly spending.
- Get local cost estimates. Ask for property tax rates and homeowners insurance quotes in the areas you are considering.
- Get preapproved, then shop below the top number. Learn the difference between prequalification and preapproval, and set your search price at your comfort payment, not the lender’s maximum.
- Compare Loan Estimates. Request estimates from several lenders on the same day and compare rates, fees and mortgage insurance before you choose.
If you want a free, independent second opinion, the CFPB lets you find a HUD-approved housing counselor by ZIP code. Counselors can walk through your budget with you at little or no cost.
Your result
Highest affordable home price$276,958
You can afford a home up to about $276,958, with a housing payment of up to $2,217 a month. Your housing payment limit is what caps the price.
- Highest monthly housing payment
- $2,217
- Loan amount
- $246,958
Showing an example with default numbers. Change any field to see your own result. The rate field starts at the 30-year fixed national average (7.4%, week of October 15, 2026). Use your own quote for a closer answer.
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This week’s average mortgage rates
Week of October 15, 2026
- 30-year fixed
- 7.4%up: +0.45 pts vs. September 17, 2026
- 15-year fixed
- 6.71%up: +0.45 pts vs. September 17, 2026
Source: Freddie Mac Primary Mortgage Market Survey. National averages for conventional loans with strong credit and about 20% down. Not an offer; your rate will differ.
More questions on this
What percentage of my income should go to a mortgage?
A cautious target is about 28% of your gross monthly income for the full house payment. That includes principal, interest, property taxes, homeowners insurance and any mortgage insurance or HOA dues. Some buyers go higher, but the more you stretch, the less room you have for savings and surprises.
Is the amount I'm preapproved for the amount I can afford?
Not necessarily. A preapproval shows the most a lender is willing to lend based on its rules, not what fits your budget. Lenders do not see your childcare costs, retirement goals or how much you like to travel, so you should set your own lower ceiling.
Do lenders use my take-home pay or my gross pay?
Lenders use gross monthly income, which is your pay before taxes and deductions. That is why a ratio that looks fine on paper can feel tight in real life. When you build your own budget, check the payment against your take-home pay too.
Does a bigger down payment let me afford a more expensive house?
Yes, because you borrow less for the same price. A larger down payment can also lower or remove mortgage insurance and may earn a better rate. The trade-off is that you should not drain your emergency savings to get there.
How do student loans affect how much house I can afford?
Student loan payments count as monthly debt in your DTI, so they reduce the house payment you can qualify for. Each loan program has its own rules for how a lender counts payments that are deferred or on an income-driven plan, so ask your lender how they will treat yours.
Should I budget for costs that are not part of the mortgage payment?
Yes. Utilities, maintenance, repairs and commuting costs often change when you buy. Many owners set aside money each month for repairs, because things like water heaters and roofs eventually need replacing and there is no landlord to call.
Will a higher interest rate change how much house I can afford?
Yes, and often by a lot. With the same monthly payment, a higher rate means a smaller loan. In our example, moving from 6.5% to 7.5% cut the loan that a $1,483 payment could support by about $22,500.
Is there a maximum loan size I should know about?
Yes. For 2026, the baseline conforming loan limit for a one-unit home is $832,750 in most of the US, and up to $1,249,125 in high-cost areas. FHA limits range from $541,287 to $1,249,125 for one unit, depending on the county.
Sources
We link only to official and primary sources. “Checked” is the date we last confirmed each page.
- What is a debt-to-income ratio? (opens in a new tab)Consumer Financial Protection Bureau · Checked
- Buying a house: Prepare to shop (opens in a new tab)Consumer Financial Protection Bureau · Checked
- What is a Qualified Mortgage? (opens in a new tab)Consumer Financial Protection Bureau · Checked
- B3-6-02, Debt-to-Income Ratios (Selling Guide) (opens in a new tab)Fannie Mae · Checked
- FHA Single Family Housing Policy Handbook 4000.1 (opens in a new tab)U.S. Department of Housing and Urban Development · Checked
- FHFA Announces Conforming Loan Limit Values for 2026 (opens in a new tab)Federal Housing Finance Agency · Checked
- HUD's Federal Housing Administration Announces 2026 Loan Limits (opens in a new tab)U.S. Department of Housing and Urban Development · Checked
- Mortgage Rates: Primary Mortgage Market Survey (opens in a new tab)Freddie Mac · Checked
How we wrote this answer
Researched and written by the Mortgage Advice Daily Editorial Team, checked against the sources listed above, and reviewed on October 18, 2026. We are not a lender and we are not paid by lenders.
This answer is general education, not financial, tax or legal advice. Rules, rates and program limits change, and your lender’s requirements may be stricter. For free one-on-one help, talk to a HUD-approved housing counselor.
