How Much House Can You Really Afford?

Think of a mortgage like renting money. You’re borrowing a large sum from a bank, and in exchange you pay rent on that money every month. But here’s where homebuying gets tricky: the rent on the money is only part of the bill. There’s also the cost of keeping the building standing, keeping the government happy (property taxes), and protecting yourself if something goes wrong (insurance). A lot of buyers fixate on the purchase price while ignoring the ongoing costs that actually determine whether they can sustain their lifestyle.

The 28/36 rule

Lenders use the 28/36 rule as a quick gut-check. Your total housing costs (principal, interest, taxes, and insurance, collectively called PITI) shouldn’t exceed 28% of gross monthly income. And your total debt payments, housing plus car loans plus student loans plus credit cards, shouldn’t exceed 36%. These thresholds help lenders manage risk. They were never designed to optimize your life.

Here’s the catch: lenders will often approve people well past these guidelines when credit scores are strong. A bank might greenlight 35% or even 40% of someone’s income going to housing. That doesn’t mean it’s comfortable.

Beyond PITI: what homeownership actually costs

Your mortgage statement shows principal and interest. Your escrow might handle property taxes and homeowner’s insurance. But that’s still not the full picture. True housing costs include several categories that don’t show up on any single bill: maintenance and repairs (budget 1–2% of the home’s value per year, so $4,000–$8,000 annually on a $400,000 home), utilities (homeowners typically pay more than renters since there’s no landlord subsidizing anything), HOA fees if applicable ($100 to $500+ monthly, and they tend to rise), and lawn care, pest control, and smaller services that add $100–$300 per month depending on the property.

And then there are day-one costs. Before the first mortgage payment even hits, expect to spend 2–5% of the home price on closing costs. On a $400,000 purchase that’s $8,000–$20,000, plus moving expenses, utility deposits, and whatever repairs or updates can’t wait. A lot of buyers drain their emergency funds right before taking on the largest financial obligation of their lives.

Location changes everything

The same $400,000 home can cost dramatically different amounts to own depending on where it sits. Property tax rates range from about 0.27% in Hawaii to over 2.2% in New Jersey and Illinois. Insurance premiums vary by climate risk. Coastal Florida and tornado-prone Oklahoma pay multiples of what someone in Utah pays. On a $400,000 home, annual property taxes alone might be around $1,100 in Hawaii, $4,000 in California, $7,200 in Texas, or $8,900 in New Jersey. That’s a difference of roughly $650 per month between the lowest and highest, and none of it has anything to do with the mortgage rate.

Understanding affordability means building up the complete monthly cost, layer by layer. The mortgage payment is the foundation, but it’s only about 65–75% of what actually leaves your bank account each month for housing.

A $400,000 home, layer by layer

Here’s a realistic scenario: a $400,000 purchase with 10% down ($40,000), a 6.5% mortgage rate on a 30-year fixed loan, and average costs for a moderate property-tax state.

So when a lender says “your mortgage payment will be $2,275,” the actual cash flowing out each month for housing is closer to $3,600. That’s a 58% gap. If someone budgets based only on the P&I number, they’re going to feel the squeeze fast.

Two buyers, same income, very different outcomes

Maya and David both earn $100,000 a year with similar financial profiles. They approach homebuying very differently.

How much house can you afford based on your salary?

A more practical guideline than the 28/36 rule: keep your true monthly housing cost (not just PITI) under 30% of take-home pay. Buyers who ignore this and stretch to their approval ceiling often become house poor — spending so much of their income on housing that there’s nothing left for retirement savings, emergencies, or everyday life. Here’s what the 30% take-home rule looks like across common income levels.

How much house can I afford on a $75,000 salary?

On a $75,000 gross salary, take-home pay is roughly $4,875 per month after taxes. Keeping true housing costs at 30% means a ceiling of $1,463 per month all-in — which typically corresponds to a comfortable home price of $180,000–$220,000.

How much house can I afford on a $100,000 salary?

On a $100,000 salary, take-home is about $6,500 per month. At 30%, the true monthly housing ceiling is $1,950 — supporting a home in the $250,000–$300,000 range. That’s well below the $450,000 a bank would likely approve for the same borrower.

How much house can I afford on a $150,000 salary?

On a $150,000 salary, take-home is roughly $9,375 per month. The 30% ceiling puts true housing costs at $2,813 per month, corresponding to a comfortable price range of $375,000–$425,000.

When a bank approves someone for 40% more home than these numbers suggest, that gap isn’t a bonus. It’s a sign that lender incentives and long-term buyer health don’t point in the same direction.

There are several levers that affect what “affordable” means for any given buyer. Some are obvious, and some are easy to overlook.

Purchase price is the biggest single factor. Every $50,000 less in purchase price saves roughly $350–$400 per month in true costs. Buying below an approval amount isn’t settling. Down payment matters too: putting 20% down eliminates PMI, which can save $100–$300 per month. But draining an emergency fund to hit 20% introduces different risks. PMI might be worth keeping if it means having six months of expenses in the bank. Location is the wildcard. Property tax rates range from 0.27% to over 2.2% of home value. A town 20 minutes away might have half the tax rate. Insurance varies by flood zone, fire risk, and state regulation. And timing plays a role. Waiting 12–18 months to save a larger down payment or improve a credit score can reduce monthly costs by hundreds.

The opportunity cost of stretching — and becoming house poor

When someone spends an extra $500 per month on housing, that money comes from somewhere. For many buyers, it comes from their future selves. That $500 per month, invested instead at a 7% average return over 30 years, would have grown to roughly $585,000. The opportunity cost of an oversized house is often a delayed retirement or a permanently lower standard of living later. This is the financial reality of being house poor: on paper the purchase looks fine, but in practice it crowds out everything else.

Similarly, depleting an emergency fund for a bigger down payment leaves people exposed. When something breaks (and it will), the options narrow to credit card debt or deferred repairs. Both cost more in the long run.

High-cost markets

If the local market is San Francisco, New York, Boston, or another expensive metro, the math can feel impossible. But there are options. A 30-minute commute difference might mean $200,000 less in purchase price. A smaller condo or townhouse builds equity while keeping costs manageable. Buying a duplex and renting half of it can offset hundreds per month, though that comes with landlord responsibilities. And if comfortable homeownership requires 50%+ of income, that’s a signal the timing isn’t right for that market. Continuing to rent while saving aggressively is a valid strategy with its own compounding benefits.

Tax considerations

Mortgage interest is generally tax-deductible for people who itemize, but the standard deduction for 2025 is $15,750 for single filers and $31,500 for married couples filing jointly. Many homeowners, especially those with smaller mortgages, end up taking the standard deduction anyway. The state and local tax (SALT) deduction, which includes property taxes, is capped at $40,000 through 2029 under the One Big Beautiful Bill Act (up from $10,000 previously). That cap starts phasing down for filers with modified adjusted gross income above $500,000. For buyers in high-tax states like New Jersey or New York, the higher SALT cap provides meaningful relief, but it’s worth running the numbers rather than assuming any particular tax benefit.

People who already own and feel stretched have options too. Refinancing when rates drop can provide relief. Renting out a room adds income. Aggressively paying down other debts frees up cash flow. In more extreme cases, selling and downsizing, while emotionally difficult, can be the move that puts finances back on solid ground.

Plug in your actual numbers below to see what a comfortable home price looks like based on income, debts, and down payment. The calculator factors in the often-overlooked costs that determine true affordability.

Quick Start Calculator

What to look for in the results

The maximum comfortable home price is the ceiling that keeps total housing costs sustainable. It’s a target to stay at or below, not stretch past. The estimated monthly housing cost shows the true all-in number including PITI, maintenance, and utilities. Compare it to take-home pay, not gross income. Down payment needed is the cash required at closing for the target price. If it exceeds current savings, either save longer or adjust the target. And the debt-to-income ratio shows total monthly debts (including the new housing payment) divided by gross income. Under 36% is generally comfortable, 36–43% is stretched, and above 43% is where lenders themselves start getting nervous.

This calculator provides estimates for educational purposes only. Actual costs vary based on specific lender requirements, local tax rates, insurance quotes, and property conditions. Results do not constitute mortgage pre-approval or financial advice. Consult with a mortgage professional and financial advisor before making home purchase decisions.