How much house can I afford on my salary?

A widely used rule of thumb is that your total home price should be no more than 3–4× your annual gross income. However, the actual limit depends on your interest rate, down payment, existing debts, and local home prices. Our calculator applies the 28% front-end DTI rule with your specific inputs to give a personalized answer. On an $85,000 salary with a 7% rate and $50,000 down, you could typically afford a home up to about $348,000.

What is the 28% rule for mortgages?

The 28% rule states that your monthly housing payment (principal and interest) should not exceed 28% of your gross monthly income. This is a conventional underwriting guideline used by most lenders — including Fannie Mae and Freddie Mac — to ensure borrowers can comfortably make payments without financial strain. It is a starting point, not an absolute cap; lenders also look at the full picture including debts, credit score, and assets.

What is debt-to-income ratio (DTI) for a mortgage?

DTI measures your monthly debt obligations as a percentage of your gross monthly income. Lenders look at two ratios: the front-end DTI (housing payment only, ideally ≤28%) and the back-end DTI (housing plus all other debts, ideally ≤36–43%). Most conventional loans require a back-end DTI below 43%; FHA loans allow up to 57% with compensating factors. A lower DTI improves your chances of approval and typically secures better rates.

How much down payment do I need to buy a house?

Conventional loans typically require a minimum of 3–5% down, though putting less than 20% down usually triggers private mortgage insurance (PMI), which adds to your monthly cost. FHA loans require 3.5% down. VA and USDA loans can require 0% down for eligible borrowers. A larger down payment reduces your loan amount, eliminates PMI sooner, and lowers your monthly payment — directly increasing how much home you can afford.

What DTI is needed to get approved for a mortgage?

Most conventional lenders prefer a back-end DTI at or below 43%. Fannie Mae's automated system (DU) can approve loans up to 50% DTI with strong compensating factors like a high credit score or large cash reserves. FHA guidelines allow up to 57% DTI in some cases. A front-end DTI at or below 28% is the conventional sweet spot. Lenders vary, so shopping multiple lenders is important if your DTI is on the higher end.

Does this calculator include taxes and insurance?

No — the calculator uses the 28% rule applied to principal and interest only. Your actual monthly housing cost will be higher once you add property taxes, homeowners insurance, and PMI (if applicable). To stay within the 28% guideline for your total PITI payment, you should aim for a principal-and-interest payment of roughly 22–24% of gross income, leaving room for the tax and insurance components.

Can I afford more house if I have a higher credit score?

A higher credit score does not directly increase the home price you can afford — that is set by income and debt. However, a better credit score can qualify you for a lower interest rate, which reduces your monthly payment for the same loan size and therefore allows you to qualify for a larger loan. For example, dropping from 7.5% to 6.5% on a $300,000 loan saves about $200/month — the equivalent of roughly $30,000 more in buying power.

Home Affordability Calculator

The Home Affordability Calculator tells you the maximum home price you can responsibly afford based on your gross income, existing monthly debts, down payment, and current mortgage rates. It applies the 28% front-end DTI (debt-to-income) rule used by most conventional lenders to cap your maximum monthly principal-and-interest payment, then back-solves the mortgage amortization formula to find the largest loan — and therefore largest home price — that fits within that limit. Use this before starting your home search to set a realistic budget.

Annual Gross Income

Combined household income, pre-tax

Monthly Debt Payments

Car loans, student loans, credit card minimums

Down Payment

Annual Interest Rate

Loan Term

Max Home Price

$348,110.01

Max Monthly Payment (P&I)

$1,983.33

Max Loan Amount

$298,110.01

Back-End Debt-to-Income Ratio

35.1%

How to use this calculator

1
Enter your annual gross income
Use your pre-tax household income. If buying with a partner, combine both incomes here.
2
Enter your monthly debt obligations
Include minimum monthly payments on car loans, student loans, credit cards, and any other recurring debts. Do not include the new mortgage payment — that is calculated for you.
3
Enter your down payment
The amount you plan to put toward the purchase upfront. A larger down payment reduces your required loan amount and therefore your monthly payment.
4
Set the interest rate and loan term
Enter the annual mortgage rate and choose your intended loan term. These are used to back-solve the maximum loan amount from your maximum monthly payment.
5
Read your maximum home price
The calculator shows your maximum affordable home price, maximum monthly payment, maximum loan amount, and your total debt-to-income ratio.

Formula

Step 1 — Max monthly P&I payment (28% front-end DTI rule):
  Max Payment = (Annual Income ÷ 12) × 0.28

Step 2 — Back-solve mortgage formula for max loan principal:
  P = Max Payment × [(1+r)^n − 1] / [r × (1+r)^n]

  Where:
    r = monthly interest rate (annual rate ÷ 12)
    n = loan term in months (years × 12)

Step 3 — Max home price:
  Max Home Price = Max Loan + Down Payment

Step 4 — Back-end DTI (for reference):
  DTI = (Max Payment + Monthly Debts) / (Annual Income ÷ 12) × 100

The 28% front-end rule is a standard underwriting guideline used by Fannie Mae, Freddie Mac, and most conventional lenders: your monthly housing payment should not exceed 28% of gross monthly income. We then invert the standard amortization formula to find the largest loan that produces exactly that payment. The back-end DTI (housing + all debts) should ideally stay below 36–43%; values above 43% typically require compensating factors for loan approval.

Worked Example

Annual Income: $85,000 Monthly Debts: $500 (car + student loan minimums) Down Payment: $50,000 Interest Rate: 7.00% per year Loan Term: 30 years Gross monthly income = $85,000 ÷ 12 = $7,083 Max monthly payment = $7,083 × 0.28 = $1,983 Monthly rate r = 0.07 ÷ 12 = 0.005833 Periods n = 30 × 12 = 360 Max loan = $1,983 × [(1.005833)^360 − 1] / [0.005833 × (1.005833)^360] ≈ $297,900 Max home price = $297,900 + $50,000 = $347,900 Back-end DTI = ($1,983 + $500) / $7,083 × 100 ≈ 35.1% (Below the 36% conventional guideline — this borrower would likely qualify.)

Frequently Asked Questions

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