How Much House Can You Afford?
A practical, plain-English guide to figuring out a home price you can comfortably afford — using the 28/36 rule, down payments and the true cost of a mortgage.
Buying a home is likely the biggest purchase you will ever make, and the question everyone asks first is deceptively simple: how much house can I actually afford? The answer is not just the largest loan a bank will approve — it is the payment you can carry comfortably while still living your life. This guide walks through how lenders think, how to sanity-check the number yourself, and how to turn it into a realistic home price.
Start with the 28/36 rule
Lenders and financial planners lean on a simple guideline called the 28/36 rule:
- 28% — the front-end ratio. Your total monthly housing payment should stay at or below 28% of your gross (pre-tax) monthly income.
- 36% — the back-end ratio. All of your monthly debt payments combined — housing plus car loans, student loans and minimum credit-card payments — should stay at or below 36% of gross monthly income.
For example, if your household earns $7,000 per month before tax, the 28% guideline puts your target housing payment around $1,960, and all debts together around $2,520.
Your payment is more than principal and interest
A common mistake is to budget only for the loan itself. Your real monthly cost — often called PITI — has four parts:
- Principal and Interest — repaying the loan plus the cost of borrowing.
- Taxes — property tax set by your local government.
- Insurance — homeowner’s insurance, and PMI if your down payment is under 20%.
Try it below: enter a home price and see how the payment breaks down once taxes, insurance and PMI are included.
Example
This is a sample result, not your calculation. Enter your own values to replace it.
Enter a home price, down payment, loan term and interest rate, then calculate to see your estimated monthly payment and amortization schedule.
Estimated monthly payment
- Principal & interest
- —
- Property tax
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- Home insurance
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- PMI
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- HOA
- —
- Other costs
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Extra payments
- Extra principal paid
- —
- Interest saved
- —
- Time saved
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- Paid off in
- —
Costs over the loan, with your yearly increases
- Property tax
- —
- Home insurance
- —
- HOA
- —
- Other costs
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- Total cost of ownership
- —
Totalled across the life of the loan, so paying it off early shortens the period these cover. Total cost of ownership adds principal, interest and PMI to them.
If you paid biweekly instead
- Biweekly payment
- —
- Paid off in
- —
- Total interest
- —
- Interest saved
- —
- Time saved
- —
Half the monthly principal and interest, paid every two weeks — 26 payments a year instead of 12.
View year-by-year amortization schedule
| Year | Principal | Interest | Balance |
|---|
Amounts are shown to the nearest dollar, in US dollars (USD).
This is an estimate of your monthly housing cost (often called PITI). Principal and interest use the fixed-rate amortization formula; PMI applies while your balance stays above 80% of the home price. Your actual rate, taxes and insurance depend on your lender, location and credit profile.
Check your entries
Enter a home price, an interest rate, and a down payment no greater than the price.
Why the down payment matters twice
Your down payment does two jobs. First, it reduces the amount you borrow, which lowers the monthly payment. Second, once you reach 20% down, you avoid PMI entirely — an extra cost that buys you nothing and simply protects the lender. Even if you cannot reach 20% right away, moving from 5% to 10% meaningfully cuts both your payment and your PMI.
Turn a payment into a price
Work backwards. Once you know a comfortable monthly payment:
- Subtract your estimated monthly taxes, insurance and any HOA dues.
- What remains is your budget for principal and interest.
- Use the mortgage calculator to find the home price whose principal-and-interest payment matches that budget at today’s rates.
Nudge the interest rate up and down while you do this — even a 0.5% change moves your affordable price by tens of thousands of dollars.
A sensible checklist before you buy
- Keep total housing costs near 28% of gross income, not the maximum a lender offers.
- Aim for a down payment that avoids or minimizes PMI.
- Leave room for an emergency fund and maintenance — homes cost more than the mortgage.
- Compare the total interest, not just the monthly payment, across loan terms.
Ready to run your own numbers? Start with the mortgage calculator, and if you are weighing other financing, the loan calculator works the same way for any fixed-rate loan.
This guide is general educational information, not financial advice. Your rate, taxes and insurance depend on your lender, location and credit profile.