How Much House Can I Afford? A Simple Step-by-Step Method

By HSP · Published October 5, 2026 · 5 min read · Money & Finance

Searching “how much house can I afford on 100k salary” gives a dozen different answers because affordability depends on more than income. Your existing debts, the interest rate, your down payment, property tax and insurance all change the result. The good news is that you can estimate a sensible range yourself in about ten minutes using the same ratios lenders look at. This guide shows how, with a full example.

Step 1: Work out your gross monthly income

Lenders usually start from your income before tax. Divide your yearly salary by 12. If you are paid hourly, our salary calculator converts hourly, weekly or bi-weekly pay into a monthly figure. For our example, take a household earning $90,000 a year, which is $7,500 a month.

Step 2: Apply the debt-to-income guidelines

Your debt-to-income ratio (DTI) is the share of your gross monthly income that goes to debt payments. The U.S. Consumer Financial Protection Bureau explains how lenders use it when deciding how much you can borrow. A widely used rule of thumb, often called the 28/36 rule, suggests:

• Housing costs (mortgage principal and interest, property tax, home insurance and any HOA fees) of no more than about 28% of gross income.
• All debt payments (housing plus car loans, student loans, credit card minimums and so on) of no more than about 36%.

These are guidelines, not laws. Some loan programs allow higher ratios, and in other countries lenders use different tests, such as debt service ratios in Canada or income multiples in the UK. Use the 28/36 rule as a conservative starting point.

For our household: 28% of $7,500 is $2,100 for housing. 36% is $2,700 for all debts. They already pay $400 a month on a car loan, so the debt limit leaves $2,700 − $400 = $2,300 for housing. Take the lower of the two figures: $2,100 a month.

Step 3: Subtract taxes, insurance and fees

The $2,100 has to cover more than the loan. Suppose property tax and home insurance together come to about $450 a month in the area they are considering. That leaves about $1,650 a month for principal and interest. Check local tax rates and get an insurance quote, because these costs vary a lot by location.

Step 4: Turn the payment into a loan amount

Now work backwards from the payment to the loan. The mortgage calculator makes this easy: try different home prices until the principal-and-interest figure is close to $1,650. Here is roughly what $1,650 a month supports on a 30-year fixed loan at different rates:

The table shows why rates matter so much: a 1.5-point difference changes the loan you can afford by almost $40,000 with the same monthly budget.

Step 5: Add your down payment

Your price range is the loan amount plus your down payment. If the household has saved $50,000 for a down payment and the rate is 6.5%, the estimate is about $261,000 + $50,000 = $311,000. Remember to keep separate money for closing costs, moving and an emergency fund. If the down payment is under 20%, many lenders require mortgage insurance, which adds to the monthly cost and lowers the price you can afford.

Check the answer against real life

Ratios are only a starting point. Before you settle on a budget, ask yourself:

• Is the payment comfortable? Lenders look at gross income, but you pay bills from take-home pay. Write a monthly budget with the new payment included.
• What if rates rise? With an adjustable rate, try the numbers one or two points higher.
• What about maintenance? Homes need repairs. Many owners set aside money every month for this.
• Do you have an emergency fund? The CFPB recommends building savings for unexpected expenses; a new home is not the time to empty your accounts.
• Are other goals still on track? Retirement saving and childcare costs should still fit.

Common mistakes

• Budgeting for principal and interest only. Tax, insurance and HOA fees can add hundreds a month.
• Using the lender’s maximum as the target. Being approved for a loan does not mean the payment is comfortable for you.
• Forgetting closing costs. Fees at closing are paid in cash on top of the down payment.
• Ignoring the total cost. A 30-year loan has a lower payment than a 15-year loan but costs far more interest. Our mortgage payment guide shows the full picture.

Quick estimate for other incomes

You can repeat the five steps for any income. As a rough guide, using the same 28% housing rule, a $60,000 salary allows about $1,400 a month for total housing costs, $100,000 allows about $2,333, and $150,000 allows about $3,500. Subtract your local tax and insurance, then use the calculator to convert the rest into a loan amount. For other loans, the loan EMI calculator uses the same formula.