By EveryFinance Editorial Team · September 29, 2026 · 7 min read
"How much house can I afford?" has two answers: what a lender will approve, and what you can comfortably live with. This guide explains how lenders arrive at the first number, shows what it looks like at different incomes, and covers the choices that change it.
Mortgage lenders mainly look at your debt-to-income ratio (DTI): monthly debt payments divided by your gross (before-tax) monthly income. They use two versions:
The most common guidelines are:
Whichever limit you hit first sets your maximum payment, and that payment sets the most you can borrow at a given interest rate.
Here's the maximum home price at several incomes, assuming a 30-year fixed mortgage at 6.5%, a $40,000 down payment, property tax of 1.1% of the home's value a year, $1,800 a year for homeowners insurance, PMI of 0.5% of the loan while you have under 20% equity, and no other debts.
A rough rule from these numbers: under the comfortable guideline, you can afford about three times your income plus a little extra from your down payment. (The $60,000 row stops at exactly $200,000 because that's where $40,000 becomes a 20% down payment. Going any higher would add PMI, which uses up the extra room in the budget.)
Your numbers will differ with your local property tax rate, insurance costs and any HOA, so plug your own figures into the home affordability calculator.
For the $100,000 example, the $2,333 monthly payment breaks down into about $1,773 of principal and interest, $294 of property tax, $150 of insurance and $117 of PMI. Property tax and insurance are a bigger share of the payment than many first-time buyers expect, and both tend to rise over time.
1. Other monthly debts. With a $100,000 income and $40,000 down, adding $500 a month in other debts doesn't change the answer, because the housing limit is still the tighter one. At $1,000 a month in debts, the maximum drops from $320,463 to $276,913; at $1,500 it falls to $211,588. Paying off a car loan before applying can raise your budget more than a raise would.
2. Your mortgage rate. At 5.5% the same buyer could afford about $346,000; at 7.5%, about $298,000. Every half-point is worth roughly $11,000 to $13,000 of purchasing power at this income. Getting quotes from several lenders on the same day is one of the simplest ways to afford more.
3. Your down payment. Each extra dollar down adds to the price directly. Crossing 20% down also removes PMI: going from $60,000 to $80,000 down raises the maximum price from about $338,000 to $372,000, more than the extra $20,000, because the PMI payment disappears.
4. Which guideline you use. The same $100,000 income could qualify for about $560,000 at a 50% debt-to-income ratio, a monthly payment of about $4,167. That's approval-level, not comfortable: it would leave little room for savings, childcare or repairs.
A lender's maximum is based on gross income and doesn't know about your retirement contributions, daycare, or plans to travel. Before settling on a price:
With $40,000 down, no other monthly debts and a 6.5% 30-year mortgage, about $320,000 under the comfortable 28/36 guideline, for a total monthly payment of about $2,333 including property tax, insurance and PMI. Under the FHA guideline of 31/43, the same income supports about $353,000.
A guideline that your total housing payment should be no more than 28% of your gross monthly income, and your housing payment plus all other monthly debt payments no more than 36%.
Yes. Each extra dollar down adds to the price you can afford directly, and reaching 20% down on a conventional loan also removes private mortgage insurance, which frees up more of your monthly budget.
Written by EveryFinance Editorial Team
Our guides are researched from primary sources such as IRS publications and CFPB guidance, and reviewed whenever the underlying rules change.
