How Much House Can I Afford?
Forget price-per-square-foot daydreams. Lenders answer this question with your income, your debts, and two ratios. Here is the exact formula and how to run it on your numbers.
Most buyers can afford a home priced at roughly 3 to 4 times gross annual income, but the precise answer comes from the 28/36 ratios. A $120,000 income with modest debts supports about a $400,000 home at current rates, with taxes and insurance deciding the final number.
The quick rule: 3 to 4 times income
As a rough filter, most buyers land between 3 and 4 times gross annual income. At $100,000 income that means $300,000 to $400,000. The range is wide because rates, taxes, and debts swing the real answer.
Use the multiple to set your search range, then run the precise calculation before making offers. The precise number is what a lender will actually approve.
The precise method: 28/36
Take gross monthly income. Multiply by 0.28: that is the max for housing (loan payment plus taxes and insurance). Multiply by 0.36 and subtract minimum monthly debt payments: that is the max for housing under the debt rule. The smaller number wins.
Example: $10,000 monthly income, $500 in debts. Housing rule: $2,800. Debt rule: $3,600 minus $500 = $3,100. The housing rule binds at $2,800 a month, which at 6.5 percent with 10 percent down supports roughly a $360,000 purchase.
What moves your number most
Down payment helps twice: it adds to the price directly and shrinks the loan the payment must support. Paying down monthly debts helps through the back-end ratio, sometimes unlocking tens of thousands in price.
Rate changes matter less than people think for affordability, but they matter enormously for total interest paid. And local taxes can dwarf everything: verify your county rate before trusting any estimate.
Skip the arithmetic
Run your exact numbers with the free home affordability calculator.
House affordability questions
Can I afford a $400,000 house on $100,000 a year?
A $400,000 price at 6.5 percent with 10 percent down needs roughly a $2,700 monthly housing payment including taxes and insurance, which is about 32 percent of a $100,000 gross income. That exceeds the 28 percent guideline, so approval would need compensating factors or a bigger down payment.
Should I include my partner's income?
Adding a co-borrower raises qualifying income but also adds their debts and requires their credit to pass. Run the numbers both ways: sometimes one strong borrower qualifies for nearly as much with less paperwork risk.