How Much Mortgage Can I Afford?

Affordability is not one number. It is a range set by your income, your debts, your down payment, and the interest rate. Lenders use a simple rule of thumb to start, and you can run the same math yourself.

The short answer: most lenders want your housing cost under about 28% of your gross monthly income, and your total debt under about 36%. That is the 28/36 rule. Here is how it works and where it falls short.

The 28/36 rule

The rule has two limits, often called the front end and the back end. Both use gross income, the pay before tax.

• Front end (28%): your housing cost should stay under 28% of gross monthly income. Housing means the loan payment plus property tax, insurance, and any association fee.
• Back end (36%): all your monthly debt, housing included, should stay under 36%. That adds car loans, student loans, and minimum card payments.

These cutoffs come from standard lender debt-to-income guidelines. Some lenders stretch them, especially with a strong credit score or a large down payment, but 28/36 is the common starting point.

A worked example

Say your household earns $6,000 a month before tax. Apply both limits.

1. Front end: 28% of 6,000 is $1,680. That is your housing ceiling.
2. Back end: 36% of 6,000 is $2,160. That is the ceiling for all debt together.
3. Subtract current debt. With $400 a month in car and card payments, you have $2,160 − $400 = $1,760 left for housing.
4. Take the lower of the two. The front-end limit of $1,680 is smaller, so that is your working housing budget.

So a lender would likely cap your housing cost near $1,680 a month. Remember that figure includes tax and insurance, so the loan payment itself is a bit less.

What else shapes the number

The 28/36 rule sets a ceiling, but four inputs move the home price that budget can buy.

• Down payment: more cash up front means a smaller loan, so the same payment buys a higher-priced home. A 20% down payment also avoids private mortgage insurance.
• Interest rate: a higher rate raises the payment for the same loan, so it lowers the price you can reach.
• Loan term: a 30-year term lowers the monthly payment versus 15 years, but you pay far more interest over time.
• Existing debt: every other payment eats into the back-end limit, leaving less room for housing.

The maximum is not the comfortable

This is the part that matters most. The amount a lender approves is a ceiling, not a target. It is the most they will risk, based on your paperwork. It says nothing about the life you want to keep living.

The 28/36 rule ignores childcare, savings goals, travel, and the cost of owning a home: repairs, higher utility bills, and the odd emergency. A payment that fills your front-end limit can leave little room when the water heater fails.

A safer move is to pick a payment below the maximum and check that it still leaves room to save. Buying under your limit is rarely a decision people regret.

Turn the budget into a home price

A housing budget is not a price tag. To get from one to the other, work backward from the payment. Strip out the tax and insurance, and what is left is the loan payment. From that, the rate and term set the loan size.

Say tax and insurance run $300 a month. That leaves about $1,380 of the $1,680 budget for the loan payment. A lower rate or a longer term lets that $1,380 support a bigger loan. Add your down payment, and you have a rough home price. Running a few rates is the fastest way to see how much the price moves.

Frequently asked questions

Does the rule use gross or net income? Gross, the figure before tax. That is why your real take-home leaves less slack than the percentages suggest.

Can I get approved above 36%? Sometimes. A high credit score, a big down payment, or strong reserves can push a lender past 36%. Being able to does not mean it is wise.

Should I borrow the full amount I qualify for? Usually not. Leave a margin for savings and surprises. A payment you can cover in a lean month beats one that only works in a good one.

Does a bigger down payment help me qualify? Yes, in two ways. It shrinks the loan, which lowers the monthly payment, and it can remove mortgage insurance at 20% down. Both free up room under the 28/36 limits.

What if interest rates change before I buy? Your budget moves with them. A rate rise lifts the payment on the same loan, so it trims the price you can reach. It is worth rechecking the math whenever rates shift.