How Much House Can I Afford?
The complete 2026 guide to calculating your home buying budget — with free calculator, the 28/36 rule, and expert tips.
Quick answer: Most lenders recommend spending no more than 28% of your gross monthly income on housing costs. For a $75,000 salary, that's about a $225,000 home with 20% down.
The 28/36 Rule Explained
The 28/36 rule is the gold standard lenders use to determine how much house you can afford. It's simple but powerful:
Mortgage + taxes + insurance ÷ gross income
Housing + car + student loans + credit cards
If your gross monthly income is $6,250 (i.e., $75,000/year), your maximum monthly housing cost should be $1,750 (28% × $6,250). And your total monthly debt payments shouldn't exceed $2,250 (36% × $6,250).
Quick Affordability Calculator
Here's the simplest formula: Annual income × 3 = Maximum home price (with 20% down and moderate debt).
| Annual Income | Max Home Price | Monthly Payment* |
|---|---|---|
| $50,000 | $150,000 | ~$960 |
| $75,000 | $225,000 | ~$1,440 |
| $100,000 | $300,000 | ~$1,920 |
| $150,000 | $450,000 | ~$2,880 |
| $200,000 | $600,000 | ~$3,840 |
*Estimated at 6.5% rate, 30-year fixed, 20% down. Does not include taxes/insurance.
🏠 Calculate Your Exact Number
Get a precise estimate with our free mortgage calculator — includes taxes, insurance, and PMI.
Try the Mortgage Calculator →5 Factors That Affect Affordability
1. Down Payment
A larger down payment means a smaller loan, lower monthly payments, and better interest rates. Aim for 20% to avoid Private Mortgage Insurance (PMI), which adds $100-300/month to your costs.
💡 Pro tip: Even if you can't hit 20%, some programs allow as low as 3% down (conventional) or 0% down (VA/USDA loans). Just factor in PMI costs.
2. Interest Rate
A 1% rate difference on a $300,000 mortgage changes your monthly payment by about $180/month — that's $64,800 over 30 years. Even small rate improvements matter enormously.
3. Existing Debt
Car loans, student loans, and credit card debt reduce how much house you can afford. Lenders look at your debt-to-income ratio (DTI). Pay down high-interest debt before house hunting.
4. Property Taxes & Insurance
These vary dramatically by location. High-tax states like New Jersey and Illinois can add $500-1,000/month to your housing costs. Always factor in local property tax rates.
5. Credit Score
Higher credit scores = lower interest rates = more house for your money. A score above 740 gets you the best rates. Below 620, you may struggle to qualify at all.
Hidden Costs Most Buyers Forget
⚠️ Warning: The purchase price is just the beginning. Budget an extra 1-4% of home value per year for these costs.
- Maintenance: Budget 1-2% of home value annually ($3,000-6,000 on a $300K home)
- Utilities: Electric, gas, water, internet, trash ($200-400/month)
- HOA fees: $50-500/month depending on community
- Closing costs: 2-5% of purchase price upfront ($6,000-15,000 on $300K)
- Home inspection: $300-500 (non-negotiable — always get one)
- Moving costs: $1,000-5,000 depending on distance
Get Pre-Approved Before You Shop
Before house hunting, get pre-approved by a lender. This tells you exactly what you can borrow and shows sellers you're serious. Here's the process:
- Gather documents: pay stubs, tax returns, bank statements, ID
- Apply with 2-3 lenders to compare rates (this counts as one credit inquiry within 14-45 days)
- Receive your pre-approval letter with your maximum loan amount
- Shop within your budget — ideally 10-15% below your max
💡 Smart strategy: Just because you're approved for $400,000 doesn't mean you should spend $400,000. Buy below your max to keep financial flexibility for emergencies and lifestyle.
📐 How We Calculate This
We use the standard amortization formula: M = P[r(1+r)^n] / [(1+r)^n – 1], where P is the principal, r is the monthly interest rate, and n is the total number of payments. Property taxes and insurance are estimated based on national and state-level averages from the U.S. Census Bureau.
Interest rates shown reflect current market ranges from Freddie Mac's Primary Mortgage Market Survey. Actual rates depend on credit score, down payment, loan type, and lender.
📚 Sources & References
🔢 Ready to Run the Numbers?
Use our free calculators to plan your home purchase with confidence.
Mortgage Calculator →Frequently Asked Questions
How much income do I need to buy a $300,000 house?
Using the 28/36 rule, you'd need a gross annual income of about $75,000-$85,000 (assuming 20% down, 6.5% rate, and moderate property taxes). Use our calculator for exact numbers.
Can I buy a house with $0 down?
Yes — VA loans (for veterans) and USDA loans (for rural areas) offer 0% down. FHA loans allow 3.5% down. However, lower down payments mean higher monthly costs due to PMI.
How much should I save before buying?
Ideally, save enough for: 20% down payment + 3-5% closing costs + 3-6 months emergency fund. On a $300K home, that's roughly $75,000-$90,000 total.