How much house can I afford?

To calculate how much house you can afford, we take into account a few primary items, such as your household income, monthly debts (for example, car loan and student loan payments) and the amount of savings available for a down payment. Here's where our numbers come from.

Mortgage rate: We automatically provide today's average 30-year, fixed interest rate for a conventional loan. If you've been quoted an interest rate by a lender, go ahead and enter that rate. The average isn't specific to you: A lender is going to offer you a mortgage interest rate based on key financial factors like debt, income and down payment, with your credit score playing a key role. Lenders generally offer their lowest available interest rates to borrowers with the highest credit scores.

Costs of homeownership: You might also want to adjust the additional expenses we include — like property taxes and homeowners insurance — to more fully account for those homeownership costs. We calculate these costs based on national averages. If you're hoping to buy a home in an area where, for example, homeowners insurance is especially costly, you'll probably want to increase that value.

Debts and expenses: Bear in mind that these results are estimates based on your input. Our math for what's affordable — or what's a stretch — may not fit with how those figures feel for you. If you know you have major monthly expenses that aren't debts (childcare is a prime example), a number that's affordable on paper could be a serious stretch IRL. Adding those expenses to the "monthly debt payments" field could bring that number down to earth. On the other hand, if buying a home would allow you to ditch ultra-high rent payments, a home price that appears aggressive could feel just right for you.

The 28/36 rule: What it is and how it works

Our calculator uses a 36% debt-to-income ratio, commonly referred to as DTI, as a suggested affordability threshold. If you're wondering where that 36% threshold for housing expenses comes from, it's the 28/36 rule. This states that you shouldn’t spend more than 28% of your gross (or pre-tax) monthly income on home-related costs, and no more than 36% on total debts (including your mortgage, credit cards and other loans, like auto and student loans).

Example: If you earn $5,500 a month, your monthly housing expenses shouldn’t exceed $1,540. To find this number, multiply your pre-tax monthly income by 0.28. (5500 X 0.28 = 1540)

Continuing the example, say you take on a home loan with that $1,540 mortgage payment and you've got another $500 in debt payments or other expenses. Your total monthly debts and expenses would now be $2,040. Dividing that number by monthly pre-tax income — again, $5,500 — gets you 0.37, or 37%.

That's pushing a bit past the 28/36 rule's guidelines for total debts, though it may still be manageable. Monthly debt payments totaling $1,980 — just $60 less — would be in that 36% sweet spot. (5500 X 0.36 = 1980)

The 28/36 rule is a broadly accepted starting point for determining home affordability, but you’ll still want to take your entire financial situation into account when considering how much house you can afford. It's a rule of thumb, not a hard-and-fast rule.

How debt-to-income ratio impacts affordability

Mortgage lenders tend to focus on your DTI as an important metric for calculating the amount of money you can borrow. DTI compares your total monthly debts (for example, your mortgage payments, including insurance and property tax payments) to your monthly pre-tax income.

For example, if your monthly mortgage payment, with taxes and insurance, is $2,000 a month and you have a monthly household income of $6,600 before taxes, your DTI would be 30%. (2000 / 6600 = 0.30)

Generally, housing expenses shouldn’t exceed 28% of your monthly income — there's that 28/26 rule again. Depending on your credit score and the type of mortgage you're getting, you may be qualified at a higher ratio.

You can also reverse the process to find a comfortable housing budget by multiplying your income by your desired DTI ratio. In the above example, a $6,600 monthly gross income would allow a mortgage payment of $1,848 to achieve a 28% DTI. (6600 X 0.28 = 1,848)

» MORE: Calculate your DTI ratio

What other factors help determine how much house you can afford?

We've talked a lot about income, debt and down payment, but there are other factors you can consider when you're thinking about home affordability.

• Cash reserves. This is the amount of money you have available to make a down payment and cover closing costs. You can use your savings, investments or other sources. Some lenders may want you to have enough cash on hand to cover a few months' worth of mortgage payments, too.

• Regular expenses. In addition to your debts, think about other monthly obligations or bills you might have. That could include expenses like childcare or groceries, as well as money goals you may have set for yourself, like putting a certain amount toward retirement each month.

• Homeownership expenses. You'll have costs that go beyond your monthly mortgage payment as a homeowner. Some, like utilities, you'll probably incur no matter where you live (unless they're included in your rent). Those numbers could shift: Heating and cooling a house will likely cost more than an apartment. You may want to budget for emergency expenses and regular upkeep, too.

• Credit profile. Your credit score and the amount of debt you owe influence a lender’s view of you as a borrower. Those factors will help determine how much money you can borrow and the mortgage interest rate you’ll earn.

» MORE: Check your credit score for free

How much house can I afford on my salary?

Want a quick way to determine how much house you can afford on a $40,000 household income? $60,000? $100,000 or more? Use our mortgage income calculator to examine different scenarios.

By inputting a home price, mortgage rate and the down payment you expect to make, you can see how much monthly or annual income you would need — and even how much a lender might qualify you to borrow.

That calculator also answers the question from another angle: What salary do I need to buy a $300,000 house? Or a $400,000 house?

It’s another way to get comfortable with the home buying power you may already have, or want to gain.

How much house can I afford with an FHA loan?

To calculate how much house you can afford, we’ve made the assumption that you're buying a home with a conventional loan. It's a fair assumption: In 2023, more than three-quarters of home loans were conventional loans.

However, if you've experienced some financial setbacks or have a lower credit score, you might apply for an FHA loan. Loans backed by the FHA can have more relaxed qualifying standards, though they do come with the added cost of required FHA mortgage insurance. If you want to explore what you could afford with an FHA loan, check out our FHA mortgage calculator for more details.

How much house can I afford with a VA loan?

With a military connection, you may qualify for a VA loan. Mortgages backed by the Department of Veterans Affairs typically don’t require a down payment.

VA loans do have some limitations — for example, these loans can only be used to purchase primary residences. You'll also pay a funding fee in order to get the loan. To see what you could afford with a VA loan, use our VA loan calculator.

Affordability and mortgage rates

You will probably notice that any home affordability calculation includes an estimate of the mortgage interest rate you will be charged. Again, our default is to show you today's average interest rate for a 30-year, fixed-rate loan.

When you apply for a mortgage, you'll be quoted a mortgage rate that is specific to your financial situation and mortgage needs. On any given day, mortgage lenders set their base mortgage rates depending on large-scale economic factors. Some change throughout the day, like bond markets. Others shift only periodically, like when the Federal Reserve takes action. And some, like the overall health of the economy, provide a constant backdrop.

The interest rate you're quoted will be relative to a lender's base rate on the day that you apply. A higher credit score, steady income and a solid down payment should put you at the lower end of the lender's current rate offerings. Weaker financials and a lower credit score likely mean a lender will apply a larger margin to their base rate — lenders will want a higher interest rate for what they perceive as a riskier loan.

A lower interest rate will help lower your monthly mortgage payment, so it's worthwhile to do what you can to find the best rate. Building your credit score, paying down debts and paying bills on time can help put you on solid financial footing. Comparing different mortgage lenders to see which will offer you the lowest combination of rates and fees can help you save, too.

» MORE: How to get the best mortgage rate

» MORE FOR CANADIAN READERS: Mortgage affordability calculator