How Much House Can I Afford? A Salary-Based Guide
· 8 min read
"How much house can I afford?" is usually the first question buyers ask — and the answer they get is often vague. Lenders will happily tell you the maximum they are willing to lend, but that number reflects their risk model, not your actual life. This guide shows the math lenders apply, then walks through a complete worked example on a $75,000 salary so you can repeat it with any income.
The Rule Lenders Actually Use: 28/36
Most lenders start from two ratios based on your gross monthly income (your salary before taxes):
- Front-end ratio (28%). Your total housing payment — principal, interest, property taxes, homeowners insurance, and HOA fees — should not exceed 28% of gross monthly income.
- Back-end ratio (36%). Your housing payment plus all other monthly debt payments (car loans, student loans, credit card minimums) should not exceed 36% of gross monthly income.
In practice, conventional loan programs often allow back-end ratios of 45% or more for borrowers with strong credit, and FHA loans can stretch further. But qualifying is not the same as living well. Staying near 28/36 leaves budget room for savings, home maintenance, and everything else in life.
Worked Example: $75,000 Salary
Let's run the full calculation step by step:
Step 1: Convert Salary to Monthly Gross Income
$75,000 ÷ 12 = $6,250 per month
Step 2: Apply the 28% Cap
$6,250 × 0.28 = $1,750 maximum total housing payment
Step 3: Subtract Taxes and Insurance
Your $1,750 has to cover more than the loan itself. Assuming a home with a 1.1% annual property tax rate and $120/month insurance:
- Property taxes: about $238/month
- Homeowners insurance: $120/month
- Left over for principal & interest: $1,392/month
Step 4: Convert Payment Into Loan Amount
At a 6.5% interest rate on a 30-year fixed loan, a $1,392 principal-and-interest payment supports a loan of roughly $220,000.
Step 5: Convert Loan Into Home Price
With a 20% down payment, the loan represents 80% of the purchase price:
$220,000 ÷ 0.80 = about $275,000 in home price
| Item | Value |
|---|---|
| Gross monthly income | $6,250 |
| Max housing payment (28%) | $1,750 |
| Property taxes + insurance | $358 |
| Budget for principal & interest | $1,392 |
| Supported loan amount | ~$220,000 |
| Approximate home price (20% down) | ~$275,000 |
Don't Forget the Back-End Check
The example above assumes no other debts. If you also pay $500/month toward a car loan and $300/month in student loans, your non-housing debt is $800:
Back-end limit: $6,250 × 0.36 = $2,250. Housing budget under this cap: $2,250 − $800 = $1,450.
Since $1,450 is lower than the $1,750 front-end allowance, the debts become your binding constraint, and the affordable home price drops accordingly. This is why paying off a car loan before applying can raise your buying power more than people expect.
Five Factors That Move the Number
- Interest rates. Each 0.5% change moves your supported price by roughly 5%. At 6.0% instead of 6.5%, the same $1,392 payment supports about $230,000 instead of $220,000.
- Down payment size. A bigger down payment shrinks the loan and can eliminate PMI, freeing monthly budget.
- Credit score. Better credit earns lower rates directly, expanding affordability without changing your salary.
- Local taxes. A 2.2% property tax state cuts your buying power far more than a 0.6% state — the same house costs meaningfully more per month.
- HOA fees. Condo and townhouse dues count fully against your 28% cap.
Frequently Asked Questions
How much house can I afford on a $75,000 salary?
Using the 28% front-end rule, a $75,000 salary supports a total housing payment of about $1,750 per month. After accounting for property taxes and homeowners insurance, that leaves roughly $1,392 for principal and interest. At a 6.5% rate on a 30-year loan, that payment supports a loan of about $220,000, which means a home price of roughly $275,000 with a 20% down payment.
What is the 28/36 rule?
The 28/36 rule is a lending guideline that limits housing costs to 28% of gross monthly income (front-end ratio) and total debt payments to 36% of gross monthly income (back-end ratio). Lenders use these ratios to decide how large a mortgage to offer, though many conventional programs allow back-end ratios up to 45% with strong credit.
Can I afford more than the 28/36 rule suggests?
Possibly. Many lenders approve loans with a back-end ratio up to 45%, and FHA loans can go higher. But qualifying for a larger loan is not the same as comfortably affording it. Sticking near the guideline leaves room for savings, maintenance, and unexpected expenses.
Does a bigger down payment increase what I can afford?
Indirectly, yes. A larger down payment reduces the loan amount needed for any given price, lowers the monthly payment, and can eliminate PMI. That frees up part of your monthly budget, letting you buy a somewhat more expensive home on the same salary.