Lenders don't approve a home price. They approve a monthly payment. So the real question is how large a payment your income can support, and the most widely used answer is the 28/36 rule.
The 28/36 rule in plain English
- 28%: your total housing payment should be no more than 28% of your gross (pre-tax) monthly income. That covers mortgage principal and interest, property tax, homeowners insurance, PMI and any HOA dues.
- 36%: all your monthly debt payments together should stay under 36%. That's housing plus car loans, student loans and credit card minimums.
On an $80,000 salary, gross monthly income is $6,667. 28% of that is $1,867 a month for housing, and 36% is $2,400 for all debts combined.
Lenders will often approve more than this. FHA loans, for example, can allow total debt ratios of 43% or higher. Treat an approval as a ceiling, not a target: staying inside 28/36 leaves room for saving, repairs and everything else a house costs.
Home price by income
This chart turns the 28% budget into a home price. It assumes a 30-year fixed mortgage at 6.5%, property tax of 1.1% of the price per year, homeowners insurance of $1,800 a year and, with 10% down, PMI of 0.5% of the loan per year.
| Household income | 28% housing budget | Home price (10% down) | Home price (20% down) |
|---|---|---|---|
| $50,000 | $1,167/mo | $146,000 | $170,000 |
| $60,000 | $1,400/mo | $179,000 | $209,000 |
| $75,000 | $1,750/mo | $229,000 | $268,000 |
| $80,000 | $1,867/mo | $246,000 | $287,000 |
| $100,000 | $2,333/mo | $313,000 | $366,000 |
| $120,000 | $2,800/mo | $380,000 | $444,000 |
| $150,000 | $3,500/mo | $480,000 | $561,000 |
| $200,000 | $4,667/mo | $647,000 | $756,000 |
These figures are for a household without large debts. High property taxes (common in New Jersey, Illinois and Texas) or expensive insurance (Florida and Louisiana) shrink them; lower costs stretch them. Interest rates matter too: on an $80,000 salary, the 10%-down price rises to about $257,000 at 6% and falls to about $236,000 at 7%.
Example: buying on an $80,000 salary
With a $1,867 monthly budget and 10% down, the numbers land on a price of about $246,000:
| Part of the payment | Monthly cost |
|---|---|
| Principal and interest ($221,300 loan at 6.5%) | $1,399 |
| Property tax (1.1% a year) | $225 |
| Homeowners insurance | $150 |
| PMI (0.5% of the loan a year) | $92 |
| Total | $1,866 |
You would also need the $24,600 down payment plus closing costs, which typically run 2–5% of the price: roughly $4,900 to $12,300 on this home.
How other debts change the answer
The 36% side of the rule matters when you carry other debts. Say the same $80,000 earner pays $450 a month on a car. Total debts can reach $2,400, which leaves $1,950 for housing. That's more than the 28% cap of $1,867, so the car payment doesn't lower the budget here.
Now make it a $700 car payment plus $250 in student loans. That leaves $2,400 − $950 = $1,450 for housing. The debts are now the limit, and the affordable price drops to about $186,000. Paying down a car loan before you apply can raise your budget by tens of thousands of dollars.
Ways to afford more house (and the trade-offs)
- A bigger down payment. Reaching 20% removes PMI and shrinks the loan. On an $80,000 salary it lifts the price from about $246,000 to about $287,000, but the down payment grows to $57,400.
- A lower rate. Improve your credit score before you apply and compare Loan Estimates from at least three lenders. Half a percentage point changes the price you can afford by about $10,000 on this income.
- Fewer other debts, if the 36% side of the rule is what limits you.
- A longer loan isn't cheaper. A 30-year loan has a lower payment than a 15-year loan, but costs far more interest. See our 15-year vs 30-year mortgage comparison.
Costs the 28% doesn't cover
- Closing costs of about 2–5% of the price, paid upfront.
- Maintenance. A common rule of thumb is to budget 1% of the home's value a year: about $2,460 on a $246,000 house.
- Utilities, which usually cost more in a house than in an apartment.
- An emergency fund. Don't empty your savings for the down payment.
Run your own numbers
The Mortgage Calculator shows the full monthly payment for any price, down payment, rate and local tax rate, with PMI and HOA dues included. If you're also financing a car, the Loan Calculator shows how that payment fits into your 36%.
Frequently asked questions
How much house can I afford on $100,000 a year?
Does the 28% include property taxes and insurance?
Is the 28/36 rule based on gross income or take-home pay?
How much do I need for a down payment?
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