How Much House Can I Afford? The Complete 2026 Mortgage Calculator Guide

## The Number Most Buyers Get Wrong Lenders will approve you for more than you can comfortably afford. The pre-approval letter shows the maximum you qualify for — not the amount that leaves room for repairs, savings, and a life outside your mortgage payment. This guide walks through exactly how to calculate what you can truly afford, using the same math lenders use — but filtered through what makes sense for your actual budget. [Use our mortgage calculator](/category/finance/mortgage-calculator) to run your own numbers as you read. --- ## The 28/36 Rule: Where to Start Most financial advisors and lenders use two ratios to evaluate affordability: **Front-end ratio (Housing ratio): ≤ 28%** > Monthly housing costs ÷ Gross monthly income ≤ 28% Housing costs include: principal + interest + property taxes + homeowner's insurance + HOA fees (PITI). **Back-end ratio (Debt-to-income): ≤ 36%** > Total monthly debt payments ÷ Gross monthly income ≤ 36% Total debt includes: PITI + car loans + student loans + credit card minimums + any other recurring debt. ### Example: $90,000 Gross Annual Income | | Amount | |-|--------| | Monthly gross income | $7,500 | | Max housing cost (28%) | **$2,100/month** | | Max total debt (36%) | **$2,700/month** | If you already have $600/month in car and student loan payments, your maximum housing payment drops to $2,700 - $600 = **$2,100** — exactly at the front-end limit anyway. The more existing debt you carry, the less house you can afford. --- ## What a Monthly Payment Actually Gets You A $2,100/month payment translates to very different loan amounts depending on the interest rate: | Interest Rate | Max Loan Amount (30-yr) | House Price (20% down) | |--------------|------------------------|------------------------| | 5.5% | $370,000 | $462,500 | | 6.5% | $333,000 | $416,250 | | 7.0% | $315,000 | $393,750 | | 7.5% | $299,000 | $373,750 | | 8.0% | $285,000 | $356,250 | This is why rising rates reduce buying power so dramatically. Going from 5.5% to 7.5% on the same payment cuts the loan amount by $71,000 — about 19%. --- ## The Full Monthly Payment Breakdown Most mortgage calculators only show principal + interest. But your actual monthly cost includes more: | Component | Typical Cost | |-----------|-------------| | Principal + Interest | ~70–75% of total payment | | Property Tax | 0.5–2.5% of home value ÷ 12 | | Homeowner's Insurance | $800–$2,500/year ÷ 12 | | PMI (if < 20% down) | 0.5–1.5% of loan ÷ 12 | | HOA (if applicable) | $0–$1,000+/month | ### Worked Example: $400,000 Home, 10% Down, 7% Rate | Component | Monthly Cost | |-----------|-------------| | P+I (30-yr at 7%) | $2,394 | | Property tax (1.2% of $400K) | $400 | | Homeowner's insurance | $150 | | PMI (0.8% on $360K loan) | $240 | | **Total PITI** | **$3,184/month** | To comfortably afford $3,184/month (28% housing ratio), you need a gross income of **$113,700/year** — significantly more than most buyers expect. [Run this calculation with your own numbers →](/category/finance/mortgage-calculator) --- ## How Much Down Payment Do You Actually Need? The conventional wisdom is 20% down to avoid PMI. But you have options: | Down Payment | Minimum Credit Score | PMI Required? | Loan Type | |-------------|---------------------|---------------|-----------| | 3% | 620+ | Yes | Conventional | | 3.5% | 580+ | Yes | FHA | | 5–19% | 620+ | Yes | Conventional | | 20% | 620+ | No | Conventional | | 0% | 620+ (VA) | No | VA/USDA | PMI typically cancels automatically when your loan balance reaches 78% of the original purchase price — or you can request cancellation at 80%. ### The 20% Down Trade-off Putting 20% down on a $400,000 home means $80,000 cash tied up. The alternative: put 10% down ($40,000), keep $40,000 invested at an average 8% annual return, and pay PMI of ~$240/month. - PMI cost over 6 years (until you hit 20% equity): $240 × 72 = **$17,280** - Investment gain on $40K at 8% over 6 years: **$23,500** - Net advantage of 10% down: **$6,220** (before tax effects) This math shifts based on PMI rate, investment returns, and how fast your home appreciates. The [mortgage calculator](/category/finance/mortgage-calculator) can model both scenarios. --- ## Hidden Costs First-Time Buyers Miss **Closing costs**: 2–5% of the loan amount. On a $400,000 home with 10% down ($360,000 loan), expect $7,200–$18,000 in closing costs. These are due at closing, in addition to the down payment. **Moving costs**: $1,000–$5,000+ depending on distance and volume. **Immediate repairs and updates**: The inspection almost always reveals something. Budget 1% of the purchase price in your first year for repairs. **Furniture and appliances**: New construction often comes without appliances. Used homes rarely come with everything you need. **Utility cost differences**: A 2,400 sq ft house costs significantly more to heat and cool than a 1,200 sq ft apartment. **Emergency fund**: Banks want you to drain your savings for the down payment. Don't. Keep 3–6 months of expenses liquid even after buying. --- ## 2026 Mortgage Rate Context Rates have moderated from the 2023 peaks but remain significantly higher than the 2020–2021 lows. As of mid-2026: - 30-year fixed: approximately 6.5–7.0% (varies by credit score and lender) - 15-year fixed: approximately 5.9–6.4% - 5/1 ARM: approximately 5.8–6.3% (fixed for 5 years, then adjusts) A 15-year mortgage builds equity much faster but has a higher monthly payment. Our calculator lets you compare both side by side. --- ## Quick Affordability Reference | Gross Annual Income | Max House Price (28% rule, 7% rate, 20% down) | |--------------------|-----------------------------------------------| | $60,000 | ~$195,000 | | $80,000 | ~$260,000 | | $100,000 | ~$325,000 | | $120,000 | ~$390,000 | | $150,000 | ~$487,000 | | $200,000 | ~$650,000 | These are conservative estimates using the 28% front-end ratio. Lenders may approve you for more — but more isn't better if it leaves no margin for life. --- ## Related Finance Calculators - [Mortgage Calculator](/category/finance/mortgage-calculator) — full P+I breakdown, amortization schedule - [Debt-to-Income Calculator](/category/finance/debt-to-income-calculator) — check your DTI ratio before applying - [Compound Interest Calculator](/category/finance/compound-interest-calculator) — model your down payment growth - [Salary to Hourly Calculator](/category/finance/hourly-wage-calculator) — convert income for affordability math --- ## Frequently Asked Questions **Can I afford a $300,000 house on a $70,000 salary?** At 7% interest with 20% down ($60,000), the mortgage on $240,000 is roughly $1,597/month P+I. Add taxes and insurance and you're around $1,900–$2,100/month. The 28% rule says max $1,633/month on a $70K salary. It's tight — manageable if you have no other debt and a solid emergency fund, but you won't have much breathing room. **How much income do I need for a $500,000 mortgage?** At 7% over 30 years, a $500,000 mortgage has a P+I payment of $3,327/month. Add taxes, insurance, and PMI and you're around $4,000–$4,500/month total housing cost. To keep housing under 28% of gross income, you need roughly **$171,000–$193,000/year**. **Is it better to get a 15-year or 30-year mortgage?** A 15-year mortgage has a lower interest rate (typically 0.5–0.75% lower) and you pay far less total interest. But the monthly payment is 30–40% higher. A 30-year gives more cash flow flexibility — and if you invest the difference, you may come out ahead. Use the mortgage calculator to compare total costs for your specific situation. **What credit score do I need to buy a house?** Conventional loans typically require 620+. FHA loans accept 580+ (with 3.5% down) or even 500–579 with 10% down. But your rate improves significantly with higher scores — a 760+ score can save 0.5–1.0% on your rate versus a 680 score, which translates to tens of thousands in interest over the life of the loan.