How Much House Can You Really Afford?

Thinking about buying a home? One of the first (and most important) questions to ask yourself is: “How much house can I afford?” While it might sound like a simple question, the answer depends on a variety of factors including your income, debt levels, credit score, down payment, and local market conditions.

The 28/36 Rule: A Quick Starting Point

A popular guideline to help estimate your homebuying budget is the 28/36 rule. Here’s how it works:

• Spend no more than 28% of your gross monthly income on housing costs (mortgage, taxes, insurance, and HOA fees).

• Keep your total debt payments (including your mortgage, car loans, student loans, credit cards, etc.) under 36% of your gross income.

It’s a solid rule of thumb that many lenders use—but it’s not set in stone. Some buyers may qualify for loans with higher debt-to-income ratios, especially with strong credit or a large down payment. Think of it as a starting point, not a strict limit.

Other Key Factors That Affect What You Can Afford

Beyond income and debt, here are a few other variables that can impact your homebuying budget:

💰 Down Payment Size

A larger down payment offers several advantages:

• Lowers your loan amount, allowing you to afford more home while keeping monthly payments manageable.

• If your down payment is 20% or more, you can avoid private mortgage insurance (PMI), which reduces your monthly expenses.

• Lenders often offer better interest rates for larger down payments.

• Stronger offers with bigger down payments may appeal more to sellers.

📉 Interest Rates

Even a small increase in interest rates can reduce your buying power. High rates might limit your options, while lower rates can significantly increase your affordability. Stay informed on market trends to make the most of timing.

🏦 Loan Type

Different loan programs like FHA, VA, or USDA loans come with varying requirements:

• FHA loans allow smaller down payments but include PMI.

• VA loans (for eligible military borrowers) offer no down payment options with competitive rates.

• USDA loans apply in certain rural areas with income and location qualifications.

Your lender can help you compare how different loan types impact your purchasing power.

📊 Credit Score

The better your credit score, the more favorable your interest rate. A stronger score means lower monthly payments and the potential to afford a more expensive home. If your score needs improvement, working on it before house hunting can pay off.

Should You Max Out Your Budget?

Just because you’re approved for a certain amount doesn’t mean you should spend it all. Buying at the top of your budget might leave you with little room for savings, emergencies, or lifestyle expenses. Carefully weigh what matters most—like travel, entertainment, or a safety net—before stretching to the maximum.

Use a Home Affordability Calculator

Home affordability calculators can give you a quick estimate based on your income, debts, and credit. They also allow you to play with scenarios—what if your credit improves? What if you increase your down payment? It’s a useful tool to visualize how small changes can make a big difference.

Don’t forget to factor in additional homeownership costs:

• Property taxes

• Homeowners insurance

• Utilities and regular maintenance

• Internet, cable, and other monthly services

• HOA fees (if applicable)

• Closing costs and moving expenses

What Can You Afford on a $100K Salary?

Using the 28/36 rule, someone earning $100,000 annually might afford:

• Monthly housing budget: Around $2,333 (28% of $8,333)

• Total debt payments: Up to $3,000/month

Assuming low debt and good credit, this could translate to a home priced between $300,000 and $450,000. However, this range can shift based on interest rates, property taxes, and down payment amount.

Final Thoughts

Determining how much house you can afford involves more than just looking at your paycheck. It’s about balancing your financial picture, future goals, and lifestyle preferences. By combining smart guidelines, helpful tools, and expert guidance from a trusted lender and real estate professional, you can confidently find the price range that works best for you.