How Much House Can I Afford in 2026?

The 28/36 Rule: Your Starting Point

Most lenders use the 28/36 rule as a baseline for mortgage qualification:

The 28% Rule (Front-End Ratio): Your total monthly housing costs — mortgage payment (principal + interest), property taxes, homeowner's insurance, and HOA fees — should not exceed 28% of your gross monthly income.

The 36% Rule (Back-End Ratio): Your total monthly debt payments — housing costs PLUS car loans, student loans, credit card minimums, and any other debt — should not exceed 36% of your gross monthly income.

Example: Household income of $100,000/year = $8,333/month gross.
- Max housing payment: $8,333 × 28% = $2,333/month
- Max total debt: $8,333 × 36% = $3,000/month
- If you have $500/month in other debt, max housing = $3,000 - $500 = $2,500/month

Important: this is what lenders will approve, not necessarily what's comfortable. Many financial advisors recommend limiting housing to 25% of gross income for a more comfortable budget.

From Monthly Payment to Home Price

Converting a monthly payment into a purchase price depends on three factors: mortgage rate, down payment, and property taxes/insurance.

At a 6.5% mortgage rate (30-year fixed), here's what different monthly payments buy:

| Monthly Payment | Home Price (20% Down) | Home Price (5% Down) |
|---|---|---|
| $1,500 | ~$285,000 | ~$225,000 |
| $2,000 | ~$380,000 | ~$300,000 |
| $2,500 | ~$475,000 | ~$375,000 |
| $3,000 | ~$570,000 | ~$450,000 |
| $4,000 | ~$760,000 | ~$600,000 |

*Includes estimated property taxes (1.1%) and insurance ($1,500/year). PMI added for < 20% down.*

Notice the 20% down payment significantly increases your purchasing power — not just because you borrow less, but because eliminating PMI ($100-300/month) frees up that much more for the mortgage itself.

Use our mortgage calculator for exact numbers with your rate and down payment.

What Lenders Actually Look At

Beyond the 28/36 rule, lenders evaluate:

Credit Score:
- 760+: Best rates (you'll pay 0.25-0.5% less than average)
- 700-759: Good rates, most products available
- 620-699: Higher rates, may need larger down payment
- Below 620: Conventional loans difficult; FHA possible (580+ with 3.5% down)

Debt-to-Income Ratio (DTI):
While 36% is the guideline, many lenders approve up to 43% DTI, and some FHA loans allow up to 50%. Higher DTI approval doesn't mean it's wise — it just means you qualify.

Down Payment:
- 20% eliminates PMI and gets the best rates
- 10-19% requires PMI but shows lender commitment
- 3-5% minimum for conventional loans (Fannie Mae HomeReady, Freddie Mac Home Possible)
- 3.5% minimum for FHA loans
- 0% for VA loans (veterans) and USDA loans (rural areas)

Employment & Income Verification:
Lenders want 2 years of stable, verifiable income. Self-employed borrowers typically need 2 years of tax returns. Commission-based income is averaged over 2 years.

Reserves:
Some lenders require 2-6 months of mortgage payments in savings after closing, especially for jumbo loans.

Hidden Costs That Shrink Your Budget

The mortgage payment is just the beginning. Budget for these costs that many first-time buyers underestimate:

Property Taxes: Vary enormously by state and locality. National average is about 1.1% of home value, but ranges from 0.3% (Hawaii) to 2.2% (New Jersey). On a $400,000 home, that's $1,200-$8,800/year.

Homeowner's Insurance: National average around $1,800/year but varies by state, coverage, and risk factors. Flood, earthquake, and hurricane zones can add $500-3,000/year.

Maintenance & Repairs: Budget 1-2% of home value annually. For a $400,000 home, that's $4,000-$8,000/year for HVAC maintenance, roof repairs, appliance replacement, etc.

HOA Fees: If applicable, $200-$500/month is common for condos and planned communities. These often increase 3-5% annually.

Utilities: A larger home means higher electricity, gas, water, and internet costs. Budget $200-$500/month depending on location and home size.

Closing Costs: 2-5% of the purchase price, due at closing. On a $400,000 home, that's $8,000-$20,000. Use our closing costs calculator for a detailed estimate.

Total rule of thumb: Your true monthly housing cost is roughly 1.3-1.5× your mortgage payment when you include taxes, insurance, and maintenance.

Affordability by Salary Level

Here's a realistic look at home affordability at common income levels, assuming 6.5% rate, 20% down, and the 28% rule:

$50,000/year: Max payment ~$1,167 → Home price ~$220,000
$75,000/year: Max payment ~$1,750 → Home price ~$330,000
$100,000/year: Max payment ~$2,333 → Home price ~$440,000
$125,000/year: Max payment ~$2,917 → Home price ~$550,000
$150,000/year: Max payment ~$3,500 → Home price ~$660,000
$200,000/year: Max payment ~$4,667 → Home price ~$880,000

Dual-income households can combine incomes but should stress-test: what if one person loses their job? Can you cover the mortgage on one income for 6+ months?

Keep in mind: median home prices vary wildly by metro. $330,000 buys a nice 3-bedroom in Dallas but barely covers a studio in San Francisco. Use our state-specific salary calculators to see take-home pay alongside local housing costs.