How Much House Can I Afford? (The 28/36 Rule Explained)
"How much house can I afford?" is the first real question of home buying, and getting it wrong is how people end up house-poor: technically owning a home but stressed about money every month. The good news is there's a simple, proven way to find your true number before you ever tour a listing. Here's how to figure out what you can genuinely afford.
Start With the 28/36 Rule
Lenders and financial planners lean on one guideline: the 28/36 rule. Spend no more than 28% of your gross monthly income on housing (mortgage, taxes, and insurance), and no more than 36% on all debt combined, including car loans, student loans, and credit cards. Those two ceilings are the foundation of an honest budget.
Work Backwards to a Home Price
Once you know your maximum monthly payment, you can work back to a loan amount using your interest rate and loan term, then add your down payment to get a maximum home price. This is where a calculator earns its keep: change the rate or the down payment and watch your affordable price move in real time.
Don't Forget the Hidden Monthly Costs
A mortgage payment is only part of owning. Property taxes, home insurance, HOA fees, utilities, and a maintenance fund all stack on top. A home that looks affordable on the mortgage alone can quietly blow your budget once these are included, which is why your housing number should cover all of them.
Factor In Your Down Payment and Closing Costs
The bigger your down payment, the smaller your loan and monthly payment, and at 20% you usually avoid mortgage insurance. On top of the down payment, budget 2-5% of the price for closing costs. Knowing both numbers keeps the upfront cash from catching you off guard.
Leave Yourself Breathing Room
Just because a lender approves you for a number doesn't mean you should spend it. Buying a bit below your maximum leaves room for life, emergencies, and actually enjoying your home. The happiest buyers are almost always the ones who bought a little less than they could.
Run Your Own Numbers
The easiest way to find your real answer is to plug your income, debts, and down payment into a tool that does the math. Our First-Time Home Buyer Kit uses the 28/36 rules to show the home price you can truly afford, then plans your down payment, closing costs, and the whole buying process in one spreadsheet, so you shop with a number you trust.
Keep reading
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- First-Time Home Buyer Checklist (Every Step to the Keys)
- How Much to Budget for Home Maintenance (The 1% Rule)