How Much House Can You Afford at Different Salary Levels
Your salary sets the ceiling on what lenders will approve. The table below assumes a 7% interest rate, 30-year fixed mortgage, $300/month in existing debts, $50,000 down payment, 1.2% property tax, $1,500/year insurance, and a 36% back-end DTI target. Your actual number will vary based on your specific debts, down payment, and local costs.
| Annual Salary | Monthly Income | Max Housing Payment | Approx. Home Price |
|---|---|---|---|
| $50,000 | $4,167 | $1,200 | $185,000 |
| $75,000 | $6,250 | $1,950 | $295,000 |
| $100,000 | $8,333 | $2,700 | $420,000 |
| $150,000 | $12,500 | $4,200 | $645,000 |
| $200,000 | $16,667 | $5,700 | $870,000 |
Estimates assume 7% rate, 30-year term, $300/mo debts, $50K down, 1.2% property tax, $1,500/yr insurance, 36% DTI. Actual approval depends on credit score, lender, and full financial profile.
The 28/36 Rule Explained
The 28/36 rule is the lending standard most mortgage lenders use to decide how much house you can afford. The "28" means your total housing costs—principal, interest, taxes, and insurance (PITI)—should not exceed 28% of your gross monthly income. The "36" means your total debt payments, including housing plus car loans, student loans, and credit card minimums, should stay under 36% of gross income.
If you earn $8,333/month gross ($100K annual), the 28% front-end limit caps your PITI at $2,333. The 36% back-end limit caps all debts at $3,000. If you already pay $500/month in other debts, your max housing payment under the back-end rule is $2,500—which becomes the binding constraint since it's lower than the $2,333 front-end limit would otherwise allow.
FHA loans are more flexible, allowing up to 43% back-end DTI in many cases. VA loans can go even higher. But conventional lenders stick close to 28/36, and stretching beyond it means you'll spend more of each paycheck on housing with less margin for emergencies, retirement savings, and everything else.
PMI and Its Impact on Affordability
Private mortgage insurance (PMI) kicks in when your down payment is less than 20% of the home price. Lenders require it to protect themselves if you default. The typical cost is 0.5% to 1% of the loan amount per year, paid monthly. On a $350,000 loan, that's $146 to $292 per month added to your payment.
PMI directly reduces your buying power because it eats into the monthly budget lenders allow you. If your max PITI budget is $2,500 and PMI costs $175/month, you only have $2,325 left for principal, interest, taxes, and insurance. That can reduce your affordable home price by $25,000 to $40,000 depending on the rate and term.
You can eliminate PMI once you reach 20% equity, either through payments over time, home appreciation, or refinancing. Some buyers choose to put 20% down specifically to avoid PMI and maximize purchasing power, though that requires more cash upfront. This calculator uses a 0.5% annual PMI rate when the down payment is below 20%.
How Interest Rates Change Your Buying Power
Interest rates have a dramatic effect on affordability. Every 1% increase in the mortgage rate reduces your purchasing power by roughly 10%. The table below shows how the same $2,500/month payment buys vastly different homes at different rates.
| Interest Rate | Max Loan (30yr) | Home Price (w/ $50K down) | Total Interest Paid |
|---|---|---|---|
| 5.0% | $466,000 | $516,000 | $434,000 |
| 6.0% | $417,000 | $467,000 | $483,000 |
| 7.0% | $376,000 | $426,000 | $524,000 |
| 7.5% | $358,000 | $408,000 | $552,000 |
| 8.0% | $341,000 | $391,000 | $579,000 |
Based on a $2,500/month P&I payment, 30-year fixed, $50K down. Total interest = total payments over 30 years minus original loan amount. Excludes taxes, insurance, and PMI.
To check how your existing debts factor in, use the debt-to-income calculator. For a detailed monthly payment breakdown on a specific home price, try the mortgage calculator.