What is the US Home Affordability?
Lenders apply the 28/36 rule: housing costs should not exceed 28% of gross monthly income, and total debt payments including the mortgage should not exceed 36%.
Crucially, the 28% covers the full PITI — principal, interest, taxes and insurance — not just principal and interest, which is why the affordable price is lower than simple mortgage calculators suggest.
Formula & worked example
Back-end limit = (Gross monthly × 36%) − existing debts
Housing budget = lower of the two, then solve for price including taxes and insurance
Worked example: $110,000 income is $9,167 a month. The 28% limit is $2,567; the 36% limit less $650 of debt is $2,650 — so $2,567 is the binding constraint. With $60,000 down at 6.75% and 1.8% for taxes and insurance, that supports a home price of roughly $370,000.
How to use this us home affordability calculator
- Enter gross annual income (lenders use pre-tax).
- Include every monthly debt: cars, student loans, credit card minimums.
- Property tax plus insurance typically runs 1.5–2.5% of value annually.
- Remember this is a ceiling, not a target.
Smart tips
- Lenders may approve more than the 28/36 rule suggests — that does not make it affordable.
- Existing debt reduces buying power sharply: $650 of monthly debt cuts affordability by roughly $100,000.
- Under 20% down adds PMI, which further reduces what you can afford.
- Property taxes vary hugely by state; the same income buys far more house in Alabama than New Jersey.
- Budget separately for maintenance at about 1% of home value a year — it is not in the 28%.
Frequently asked questions
What is the 28/36 rule?
Housing costs under 28% of gross monthly income, and all debt payments including housing under 36%. It is the standard lender guideline.
How much house can I afford on $110,000?
Roughly $370,000 with $60,000 down at 6.75%, assuming modest existing debt. Higher debt or rates reduce this significantly.
Should I borrow the maximum I qualify for?
Usually not. Approval limits leave little room for emergencies, rate changes or job disruption.
Does student loan debt affect home affordability?
Yes, directly. Every $100 of monthly student loan payment reduces affordability by roughly $15,000–18,000 of home price.
Want the theory behind the numbers? Read our home buying guides on the Money Blog.