How Much House Can You Afford? A Practical 2026 Guide
The 28/36 rule, down payments, and the hidden costs of owning a home, explained with clear examples so you know your real budget before you shop.
Falling in love with a house you cannot comfortably afford is one of the most expensive mistakes in personal finance. Before you browse listings, it is worth working out your real budget, not just the biggest loan a bank will hand you, but the payment you can live with while still saving, spending and sleeping at night.
Start with the 28/36 rule
Lenders and financial planners often use the 28/36 rule as a sanity check:
- 28% of your gross monthly income is the suggested ceiling for housing costs.
- 36% is the ceiling for all your debt payments combined, mortgage, car, student loans, credit cards.
Here is what the 28% housing ceiling looks like at different income levels:
| Annual gross income | Gross monthly | Max housing (28%) |
|---|---|---|
| $60,000 | $5,000 | $1,400 |
| $80,000 | $6,667 | $1,867 |
| $100,000 | $8,333 | $2,333 |
| $120,000 | $10,000 | $2,800 |
The 28/36 rule uses gross income, but your bills come out of take-home pay. If a lot of your salary goes to tax, pension or benefits, aim for the lower end of the range. See our guide to take-home pay.
Your payment is more than the loan
New buyers often budget for principal and interest alone, then get blindsided by the extras. A typical monthly housing payment includes four parts, sometimes called PITI:
Property taxes and insurance can add hundreds a month, and if you put down less than 20%, private mortgage insurance (PMI) stacks on top. Always price the whole payment, not just the loan.
The down payment changes everything
A larger down payment helps in three ways: you borrow less, your monthly payment drops, and at 20% or more you usually avoid PMI entirely. The trade-off is time, it takes longer to save a bigger deposit, so weigh the two against your local market.
Lenders base approvals on your income and debts, not on your lifestyle, goals or the cost of raising a family. Borrowing the maximum can leave you "house poor". Choose the payment that fits your life, not the one the bank allows.
A simple way to find your number
- Calculate 28% of your gross monthly income, that is your housing ceiling.
- Subtract estimated taxes, insurance and any HOA fees to find your principal-and-interest budget.
- Work backwards to a loan amount and home price using a mortgage calculator.
- Pressure-test it against your actual take-home pay and savings goals.
Estimate the real monthly cost. Enter a home price, down payment, rate and term to see your principal-and-interest payment and total cost.
Open the Mortgage Calculator →The bottom line
Affordability is not the largest loan you qualify for, it is the payment that leaves room for the rest of your life. Use the 28/36 rule as a starting point, budget for the full PITI payment, aim for a healthy down payment, and let the numbers, not the listings, set your price range.
Frequently asked questions
What is the 28/36 rule?
It is a guideline suggesting you spend no more than 28% of your gross monthly income on housing costs, and no more than 36% on total debt payments including the mortgage, car loans and credit cards.
How much deposit do I need to buy a house?
It varies by loan type. Putting down 20% lets you avoid private mortgage insurance (PMI), but many loans allow far less, sometimes 3 to 5%, in exchange for higher monthly costs.
Does my mortgage payment include taxes and insurance?
Often yes. Lenders frequently bundle principal, interest, property taxes and homeowners insurance into one monthly payment, known as PITI. Budget for all four, not just principal and interest.