Lenders will tell you the maximum they’re willing to lend. That’s not the same as what you can comfortably afford. Use the calculator to find your real number — then read the guide to understand every factor behind it.
The 28/36 rule is the simplest starting point for any affordability calculation. It exists because it leaves room in your budget for everything else — groceries, savings, healthcare, and the unexpected expenses that always arrive uninvited.
28%
Housing costs
Your total monthly housing payment — mortgage principal, interest, property taxes, and insurance — should stay below 28% of your gross monthly income.
36%
Total monthly debt
All monthly debt payments combined — housing plus car loans, student loans, credit cards, and any other obligations — should stay below 36% of gross monthly income.
Example: You earn $7,500/month gross. The 28% rule caps your housing payment at $2,100. The 36% rule caps total debt at $2,700, meaning your non-housing debt should stay under $600/month to stay within both limits.
Lender approval ≠ comfortable affordability. Many lenders allow DTI up to 43–50% for certain loan programs. Being approved for a larger mortgage doesn’t mean you should take it. The 28/36 rule is more conservative than lender maximums for good reason — it preserves financial breathing room.
Section 02
What lenders actually look at
When you apply for a mortgage, lenders examine your full financial picture. Understanding exactly what they weight — and how — helps you walk in prepared.
Debt-to-income ratio (DTI)
Your DTI is the most important number in mortgage lending. Divide your total monthly debt payments by your gross monthly income. A DTI of 20% is excellent; 36% is the conservative ceiling; most programs allow up to 43%. Some allow higher with compensating factors like a large down payment or excellent credit.
Credit score
Your credit score determines both whether you qualify and what interest rate you pay. The difference between a 620 and a 760 score on a $400,000 mortgage can easily be 0.75–1.5% in interest rate — translating to $150–$300/month and $54,000–$108,000 over 30 years.
Credit Score
Typical Rate Range
Monthly Payment*
30-yr Total Interest
760–850
Best available
Lowest
Save $50k–$100k+
700–759
Good rates
~$50–100 more/mo
—
660–699
Average rates
~$150–200 more/mo
—
620–659
Higher rates
~$250–350 more/mo
Pay $90k–$125k more
*Estimates based on a $350,000 loan. Actual rates vary by lender, loan type, and market conditions.
Down payment size
A larger down payment reduces your loan amount, lowers your monthly payment, and can eliminate PMI if you reach 20%. It also signals financial stability to lenders. The minimum varies by loan type: 3% for some conventional loans, 3.5% for FHA, 0% for VA and USDA.
Interest rate and loan term
30-year mortgages have lower monthly payments but higher total interest. 15-year mortgages cost significantly less in total interest but require larger monthly payments. Most buyers choose 30 years for the lower payment and flexibility — then make extra principal payments when cash flow allows.
Section 03
Monthly costs beyond the mortgage
Your mortgage payment is just the start. These additional costs are often underestimated by first-time buyers — and they significantly affect what you can actually afford.
Property taxes
Varies widely by location — from under 0.5% to over 2.5% of home value annually. On a $350,000 home at 1.2%, that’s $4,200/year ($350/month) added to your effective housing cost.
Homeowners insurance
Required by lenders. Typically $1,000–$2,500/year depending on home value, location, and coverage. Higher in areas prone to hurricanes, flooding, or wildfires.
PMI (if less than 20% down)
0.4–1.5% of loan amount annually. On a $300,000 loan at 1%, that’s $3,000/year ($250/month) until you reach 20% equity. Can be canceled once you hit that threshold.
HOA fees
Applies in many communities — condos, planned developments, gated neighborhoods. Can range from $50 to $1,000+/month. Always check before making an offer.
Utilities
Electricity, gas, water, trash, internet — typically $200–$500+/month depending on home size, climate, and efficiency. Larger, older homes cost more to heat and cool.
Maintenance & repairs
Budget 1–3% of home value annually. On a $350,000 home, that’s $3,500–$10,500/year. Older homes and deferred maintenance increase this number significantly.
Add it all up before you commit. A $350,000 home with a $1,800 mortgage payment might actually cost $2,600–$2,900/month when you include taxes, insurance, PMI, HOA, utilities, and maintenance reserves. Make sure your 28% calculation accounts for the full picture, not just the mortgage payment.
Section 04
Affordability by salary
Income translates to home-buying power through the 28% rule — but the actual price range depends heavily on your existing debts, down payment, and local tax rates. Here are rough estimates assuming moderate debt, a 10% down payment, and a 6.5% interest rate.
$60k / year
Max housing payment
~$1,400/mo
Estimated home range
$200k–$250k
$80k / year
Max housing payment
~$1,867/mo
Estimated home range
$275k–$325k
$100k / year
Max housing payment
~$2,333/mo
Estimated home range
$350k–$425k
$130k / year
Max housing payment
~$3,033/mo
Estimated home range
$450k–$550k
$200k / year
Max housing payment
~$4,667/mo
Estimated home range
$700k–$875k
Estimates assume moderate existing debts, 10% down, 6.5% rate, 30-year term, and average taxes/insurance. Your actual range will vary. Use the calculator above for a personalized estimate.
Section 05
How to afford more house
If your current financial picture doesn’t get you to your target home price, these levers actually move the number.
1
Pay down high-interest debt
Every dollar of monthly debt you eliminate improves your DTI and frees up room in the 36% ceiling for a larger mortgage payment. Paying off a $400/month car loan can qualify you for roughly $60,000–$70,000 more in home price at typical rates.
2
Raise your credit score
Moving from 660 to 740 can drop your interest rate by 0.75–1%, adding $150–$250/month in payment capacity at the same income. Pay bills on time, keep credit utilization below 30%, and don’t open new accounts before applying.
3
Increase your down payment
A larger down payment reduces your loan amount and monthly payment, allowing you to qualify for a more expensive home. It also eliminates PMI at 20%, freeing up $200–$400/month that can support a larger mortgage.
4
Add a co-borrower
A spouse, partner, or family member as a co-borrower adds their income to the qualification calculation. This is one of the fastest ways to increase buying power — two incomes unlock a significantly larger budget than one.
5
Explore down payment assistance
State and local housing agencies offer grants, second mortgages, and forgivable loans that reduce the cash you need upfront. Many buyers qualify without knowing these programs exist. Search your state housing finance agency website.
6
Consider a different neighborhood or property type
Home prices vary dramatically by location — sometimes $100,000+ from one neighborhood to the next. Expanding your search radius or considering a townhouse vs. single-family can unlock significantly more for your budget without changing your finances at all.
Section 06
Calculator vs. pre-qualification vs. pre-approval
These three tools give you different levels of certainty about what you can afford. Understanding the difference saves you from showing up at offers with the wrong expectations.
Full document review, hard credit pull, income verified
Reliable — use for offers
High
Fully underwritten
Pre-approval + full underwriting complete
As close to guaranteed as it gets
Very high
Get pre-approved before you start shopping in earnest. A pre-approval letter shows sellers you’re serious and qualified. Without one, sellers won’t consider your offer in competitive situations — and you’re just window shopping with no price guarantee.
Section 07
Frequently asked questions
How much house can I afford on a $70,000 salary?
Using the 28% rule, your maximum monthly housing payment is about $1,633. Depending on your down payment, debts, and local tax rates, that typically translates to a home in the $230,000–$285,000 range at current rates. Use the calculator above with your specific numbers for a more precise estimate.
What salary do I need for a $400,000 home?
To comfortably afford a $400,000 home using the 28/36 rule with average taxes, insurance, and moderate existing debts, you typically need a gross annual income of at least $85,000–$100,000, depending on your interest rate and down payment size. A larger down payment or lower debts can bring that threshold down.
Can I count freelance or bonus income toward mortgage approval?
Yes, but lenders typically require at least two years of documented history for variable income. They’ll usually average the two-year income rather than using your most recent year. Recent, dramatic increases in freelance income may be partially discounted. W-2 employment income is weighted more reliably.
What happens if mortgage rates rise after I determine my budget?
Rising rates reduce your purchasing power — the same monthly payment buys less house. A 0.5% rate increase on a $350,000 loan adds about $100/month and reduces what you can afford by roughly $15,000–$20,000 at the same income. If rates move before you find a home, recalculate your budget with the new rate and adjust your target price accordingly.
How does selling my current home affect what I can afford next?
Sale proceeds from your current home can significantly expand your budget — more equity means a larger down payment, a smaller loan, and potentially no PMI on the next purchase. If you sell to ARS for cash, you know your exact proceeds before making an offer on your next home, removing the timing uncertainty that complicates most buy-sell scenarios.
Is it better to buy at the top of my budget or leave room?
Leave room. Buying at your absolute maximum leaves no buffer for income disruptions, unexpected repairs, rising property taxes, or major life changes. A general rule: if buying the home requires cutting back on retirement savings or emergency fund contributions, you’re stretching too far. The stress of being house-poor is real and persistent.
Know your number. Find your home.
Browse properties within your budget.
ARS has properties available across the region. See what fits your range — no pressure, no commitment, just options.