How much house
can you actually afford?

Field guide

How to figure out what house you can really afford.

“How much house can I afford?” is a different question from “how much house will a bank approve me for?” and the answer to the first is almost always smaller than the answer to the second. This calculator shows both, side by side, so you can see the gap clearly before you start touring properties.

Understanding the 28/36 rule.

The 28/36 rule is the most widely cited affordability heuristic in US personal finance. It comes from decades of mortgage-default research and gives the two ratios most lenders evaluate when underwriting a loan:

• 28%: front-end ratio. Your monthly housing payment (principal, interest, property tax, insurance, HOA) should not exceed 28% of your gross monthly income.
• 36%: back-end ratio. Your total monthly debt payments, housing plus car loan, student loan, credit-card minimums, and any other recurring debt, should not exceed 36% of gross monthly income.

On a $95,000 annual salary, gross monthly income is about $7,917. The 28/36 rule says no more than ~$2,217 for housing and ~$2,850 for total debt, leaving ~$633 for other debt service before housing gets squeezed.

Why 28/36 specifically?

The numbers aren’t magic; they’re the inflection points where mortgage default rates start climbing materially in long-run banking data. Households below 36% back-end DTI overwhelmingly stay current; above it, default rates rise sharply and continue climbing past 45–50%. The 28% front-end is a tighter version that leaves some buffer for property tax and insurance, which don’t scale with income.

What “Standard” and “Aggressive” mean

The tier picker on the form lets you compare three common standards:

• Conservative: 28/36. The textbook rule. Comfortable cushion, low stress, easiest to absorb a job loss or rate shock.
• Standard: 33/40. Most modern underwriters will approve up to roughly these limits for a borrower with good credit. Achievable monthly, but less margin if anything goes wrong.
• Aggressive: 40/50. The FHA / max-stretch ceiling. Some lenders go here for borrowers with strong compensating factors (large down payment, excellent credit, stable job). Qualifies, but lives tight. A car repair, medical bill, or rate reset can quickly create stress.

The right tier depends on job stability, emergency fund size, and how much you value financial flexibility vs. square footage. Most planners suggest staying within the Conservative tier unless you have very high income certainty and a meaningful cash buffer.

How your down payment affects your monthly cost.

The down payment is one of the largest levers you have on both your monthly payment and the kind of mortgage you can get. It changes your monthly cost in three distinct ways:

1. Lower principal → lower monthly payment

For every $1,000 of down payment on a 30-year fixed at 6.5%, you cut your monthly payment by about $6.32. So an extra $20,000 down knocks roughly $126/month off your payment for the entire 30-year life of the loan; that’s about $45,360 in lifetime savings.

2. 20% down eliminates PMI

Conventional mortgages with less than 20% down require Private Mortgage Insurance (PMI): a recurring fee paid to the lender to cover their risk on the high-leverage portion of the loan. PMI typically runs 0.5%–1.5% of the loan amount per year, adding roughly $40–$200 to a typical monthly payment. It disappears once your loan-to-value ratio hits 78% (you can request removal at 80%).

Putting 20% down avoids PMI entirely, often the biggest single reason buyers stretch to that threshold even when cash flow doesn’t require it.

3. Better rate, sometimes

Lenders often quote slightly lower rates (5–25 basis points) for borrowers putting 25%+ down, because the loan is lower-risk. The effect is smaller than principal reduction or PMI elimination, but on a 30-year mortgage even 0.125% lower rate compounds to thousands in savings.

The 20% down fallacy

Despite the conventional wisdom, you don’t need 20% down to buy a home. FHA loans accept as little as 3.5%; many conventional loans go down to 3%; VA and USDA loans can be 0% for eligible borrowers. The math of waiting to save 20% vs. buying now with PMI depends on local home-price growth; in fast-appreciating markets, buying earlier with PMI can outperform the “wait and save” strategy by tens of thousands of dollars.

Monthly cost vs. total cost

A larger down payment lowers your monthly housing cost but raises the opportunity cost of the cash you tied up. If you put $50K extra down on a 6.5% mortgage, you save 6.5% per year of effective interest. If that same $50K invested in stocks would have earned 7%/year, the down payment is technically a worse use of capital, but a much safer one. Most buyers value the certainty more than the spread, which is why aggressive down payments remain popular.

What this calculator doesn’t include.

The hero number is the price your principal-and-interest payment can support, given the chosen tier. In real life, your full monthly housing cost is bigger:

• Property tax: typically 0.5%–2.5% of home value per year, varying wildly by state and municipality.
• Homeowners insurance: $1,500–$5,000/yr for typical US homes.
• HOA dues: $0–$1,000+/month for condos and planned communities.
• PMI: when down payment is below 20%, as discussed above.
• Maintenance: budget about 1% of home value per year for repairs and capital expenses.

For a fully-loaded monthly payment that includes taxes, insurance, HOA, and PMI, use the Mortgage Calculator. For the underlying loan-payment math, see the Payment Calculator.

Disclaimer

This is a planning tool, not pre-approval. Actual mortgage qualification depends on credit score, employment history, asset documentation, the property itself, and the specific lender’s overlays, none of which the calculator can know.