How Much House Can You Afford?
Published July 23, 2026 · Updated October 3, 2026 · 5 min read · By Ramanathan · Paired with the Affordability Calculator
The short answer: your income supports roughly four and a half times its annual figure in house price, at a 36% debt-to-income ratio with no other debts, a 20% deposit, and a 30-year loan at 6.5%. The standard calculation overstates that number by a six-figure sum, because it quietly ignores property tax and insurance. Both numbers are below.
What your income actually supports
Every row is computed with the same reducing-balance maths a lender uses: 36% of gross income is the housing allowance, that payment is converted back into a loan at 6.5% over 30 years, and the price assumes a 20% deposit.
| Gross income | Housing budget | Standard answer | Realistic answer |
|---|---|---|---|
| $50,000 | $1,500/mo | $296,645 | $222,484 |
| $75,000 | $2,250/mo | $444,968 | $333,726 |
| $100,000 | $3,000/mo | $593,291 | $444,968 |
| $150,000 | $4,500/mo | $889,936 | $667,452 |
| $200,000 | $6,000/mo | $1,186,581 | $889,936 |
The standard answer is what a 28/36 calculator gives you: it converts the whole housing allowance into loan principal. The realistic answer reserves a quarter of that allowance for property tax and insurance, which you pay every month whether the calculator counts them or not.
On a $100,000 income the two differ by $148,323. That is not a rounding error or a safety margin someone invented — it is the price of a real monthly obligation that the simple version of the sum leaves out. Adjust your own figures on the affordability calculator; the rest of this guide is about why even the realistic column is a ceiling rather than a target.
Should you spend up to your maximum DTI ratio?
The 28/36 rule and its cousins exist to protect the lender from default, not to protect your quality of life. A back-end DTI of 36% — or the 43% many lenders will stretch to — describes the most debt they are willing to see you carry, based on gross, pre-tax income. It says nothing about your childcare bills, your savings goals, the lifestyle you want to keep, or how secure your job feels. Borrowing right up to the cap leaves you what people call "house poor": technically a homeowner, but with so little breathing room that every month is tight and any surprise becomes a crisis.
The payment is bigger than principal and interest
The mortgage quote you see is usually just principal and interest. The real monthly cost — often written PITI — adds property taxes and homeowners insurance, collected through an escrow account. If your down payment is under 20% you will also pay private mortgage insurance (PMI) until you build enough equity, and many homes carry HOA or maintenance dues on top. Together these can add hundreds of dollars a month that the headline loan figure ignores. That is why the affordability calculator counts property tax, insurance and PMI inside the monthly budget before it works out a price: every dollar they take is a dollar that cannot go to the loan.
Broken out, a monthly housing payment can include:
| Component | What it is | When it applies |
|---|---|---|
| Principal and interest | The repayment of the loan itself, usually the only figure in the quote you see | Always |
| Property taxes | Collected through an escrow account | Always |
| Homeowners insurance | Collected through the same escrow account | Always |
| Private mortgage insurance (PMI) | Protects the lender, paid until you build enough equity | When your down payment is under 20% |
| HOA or maintenance dues | Charged on top by the community or building | On many homes |
What housing costs does the mortgage payment leave out?
Owning is more expensive than the loan. A widely used rule of thumb sets aside about 1% of the home's value each year for maintenance and repairs — roofs, water heaters, appliances, paint — and older homes cost more. Utilities on a house you own are usually higher than on the flat you rented. Furnishing a larger space, higher commuting costs from a cheaper-but-farther suburb, and property tax that rises over time all chip at the budget. None of these appear in a DTI calculation, yet they are as real as the EMI.
How much cash do you need up front to buy a house?
Affordability is not only monthly. Buying takes a down payment plus closing costs, which commonly run a few percent of the purchase price for appraisal, legal, and loan fees, and then moving and immediate setup costs. Draining your entire savings to hit a bigger down payment is a classic mistake: you want to arrive as an owner with a cash cushion still intact, not scraped to zero the day you get the keys.
Keep an emergency fund after you buy
The single best protection against a mortgage going wrong is a reserve of three to six months of expenses that survives the purchase. Job loss, a medical bill, or a major repair are not rare events over a 30-year loan — they are near-certainties at some point. An owner with reserves rides them out. An owner who stretched to the DTI cap and emptied their savings can miss payments and, at the extreme, lose the home. If buying the house you qualify for would wipe out your emergency fund, you cannot really afford that house yet.
Pulling the costs that sit on top of the mortgage together:
| Cost | When you pay it | Rough size |
|---|---|---|
| Maintenance and repairs | Ongoing | About 1% of the home's value a year; more for older homes |
| Utilities | Ongoing | Usually higher than on the flat you rented |
| Property tax increases | Ongoing | Rises over time |
| Commuting from a cheaper-but-farther suburb | Ongoing | Higher |
| Down payment | Once, up front | The 20% deposit assumed in the table above, for example |
| Closing costs | Once, up front | A few percent of the purchase price (appraisal, legal and loan fees) |
| Moving and immediate setup | Once, up front | Varies |
| Emergency fund after you buy | A reserve to keep intact | Three to six months of expenses |
Set the number from your life, not the lender's ceiling
A healthier way to size a home is to work backwards from the life you want. Decide what you need to keep saving each month — for retirement, for goals, for the reserve. Subtract that and your other essentials from your take-home (not gross) pay, and see what is genuinely left for a housing payment. That figure is often comfortably below the lender's maximum, and the difference is your margin of safety. Many financially secure buyers deliberately borrow well under what they qualify for: the freedom of a payment they barely notice is worth more than the extra bedroom that keeps them awake at night.
How to use the calculator wisely
The affordability calculator already works the realistic way: it applies both the 28% housing and 36% total-debt ratios and counts tax, insurance and PMI, so its default answer follows the same logic as the realistic column above, not the standard one. Use it in two passes. For the ceiling, open its Advanced options and raise the housing ratio and DTI cap toward the 43% a lender may allow — useful for knowing your outer limit before pre-approval. For the comfortable figure, keep the defaults, or enter your take-home pay in place of gross income, and watch the price fall to a number that leaves real room in your budget. The honest answer to "how much house can I afford?" almost always sits between those two figures — closer to the conservative one than the maximum. Borrow for the life you want to keep, not just the house you can technically get.
Find your comfortable number:
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Related guide: CIBIL score and your home loan — how it affects your rate
This guide uses US mortgage figures. See the US mortgage calculator & home loan hub for more US-specific calculators and guides.