How Much House Can You Afford? The 28/36 Rule and the Math Behind It

The most dangerous number in home buying is the one on your pre-approval letter. It is not a recommendation — it is the maximum risk a lender is willing to let you take with their money, computed from your gross income and your existing debts, with no line items for retirement savings, childcare, or a life. Your real budget comes from a different calculation entirely.

Start with the full process in our complete guide to your first mortgage; this piece is about the single number at its center.

The 28/36 rule, translated

The classic guideline has two rails:

• Front-end (28%): total housing cost — principal, interest, property taxes, homeowner’s insurance, plus HOA or PMI if applicable — at or below 28% of gross monthly income.
• Back-end (36%): housing plus all other debt payments (car, student loans, cards) at or below 36% of gross.

On an $8,333 gross month ($100k salary): housing ceiling ≈ $2,330, total-debt ceiling ≈ $3,000. If you already pay $500 a month on a car and student loans, the back-end rail binds first: $3,000 − $500 = $2,500 for housing — in this case the front-end rule is still the binding constraint. With $900 of existing debt, the back end cuts your housing budget to $2,100.

From payment to purchase price: the rate matters brutally

The monthly principal-and-interest payment on a 30-year fixed loan per $100,000 borrowed:

• At 5%: ≈ $537
• At 6%: ≈ $600
• At 7%: ≈ $665

Now reverse it. That $2,330 housing budget is not all mortgage: subtract typical property taxes and insurance — say $450/month combined in a moderate-tax area — leaving ~$1,880 for principal and interest. At 7%, that supports a loan of about $283,000; at 5%, about $350,000. A two-point rate move changed your buying power by $67,000 — roughly 20% — with the same income and the same budget. This is why “how much house can I afford” has no fixed answer, only an answer at a given rate.

Add your down payment to the loan amount for the price ceiling: $283,000 loan + $60,000 down = a ~$340,000 home, at 7%.

The costs that don’t fit in the letter

The pre-approval math ignores three categories that routinely break new homeowners:

1. Maintenance: budget ~1% of the home’s value per year. $290 a month on a $350,000 home, averaged — quiet years, then a $9,000 roof. Fannie Mae and Freddie Mac both counsel buyers to hold reserves for exactly this.
2. Transaction drag. Closing costs run roughly 2–5% of the price on the way in; selling costs more. Buy a home you might need to leave in two years and these frictions can erase any equity gains.
3. The life you already have. Retirement contributions, childcare, travel, the car that will need replacing. Only you can model these — which is why the budget must come from your cash flow, not the lender’s ratio.

A better method: the take-home test

For a gut-check against the ratios, work from money you actually see. A sustainable rule of thumb: keep the all-in housing payment at or below about 35% of take-home pay if you are also saving 15%+ for retirement and carrying other debts. On $6,500 net a month, that is ~$2,275 — close to what 28% of gross says on $100k, which is reassuring: the two methods triangulate.

Then stress-test it: could you still pay if one income paused for three months? If the honest answer is no, the house is too expensive regardless of what any rule permits. Our first-time buyer mortgage guide walks the full budget worksheet, and the buying vs renting honest math covers whether you should stretch at all.

The bottom line

Compute your number three ways — 28% of gross, 36% back-end minus existing debts, and 35% of take-home — and take the lowest. Convert it to a loan at today’s rate, subtract taxes and insurance first, and hold back 1% a year for maintenance. When the bank approves you for more, smile and buy the house that lets you sleep, save, and fix the furnace — then shop lenders for the best terms on that number, starting with our best mortgage lenders for first-time buyers of 2026.