How Much House Can I Actually Afford? The 28/36 Rule (And Why It's Half the Picture)

The most-Googled question in home buying has the most misleading answer. Lenders will tell you how much they'll lend you. Real-estate agents will tell you how much you "could stretch for." Both numbers are usually 20-30% higher than the amount that actually leaves you with breathing room. Here's the honest math, the costs the standard rules of thumb ignore, and a framework that gets you to a real number in 10 minutes.

The 28/36 rule

This is the rule of thumb every mortgage calculator quietly uses behind the scenes:

• 28% of gross monthly income is the maximum your housing payment (principal + interest + property tax + homeowners insurance, abbreviated PITI) should consume.
• 36% of gross monthly income is the maximum your total debt obligations (PITI + car payment + student loans + credit card minimums) should consume.

Lenders use a variant — most conventional loans cap the back-end DTI (debt-to-income) at 43%, with FHA loans going as high as 50% in some cases. That means a lender will approve you for far more than the 28/36 rule suggests is comfortable. The gap between "approved for" and "comfortable with" is where most first-time buyers get into trouble.

On a $100,000 gross household income:

• 28% front-end: $2,333/month max housing payment
• 36% back-end: $3,000/month max total debt
• 43% lender max: $3,583/month total debt (where most people get pre-approved)
• 50% FHA max: $4,167/month total debt (financially risky territory)

The real monthly payment is bigger than the calculator shows

This is the part that gets people. The headline number on a mortgage calculator is principal + interest — the loan payment itself. The actual monthly cost of owning a home is closer to:

Real monthly cost = Principal + Interest + Property Tax + Insurance + Maintenance + Repairs + HOA (if any) + PMI (if down payment < 20%) + Utility delta vs renting

Walk through a $400,000 home at 7% with 20% down ($80,000) on a 30-year mortgage (we use 7% as a round-number illustration; the Freddie Mac PMMS 30-year average was 6.36% as of May 14, 2026, so your real payment today would be modestly lower):

• Principal + Interest: $2,129/mo (the number most calculators show)
• Property tax at 1.1% national average: $367/mo
• Homeowners insurance at $1,800/yr average: $150/mo
• Maintenance at 1% of home value/yr (industry estimate): $333/mo
• Total: ~$2,979/mo before HOA, PMI, or utility differences

That's $850/month above the P+I number the typical calculator displays. Over a 30-year mortgage that's roughly $306,000 of expense the rule of thumb assumed away.

If you have less than 20% down, add PMI (private mortgage insurance) — typically 0.5%-1.5% of the loan balance per year. On a $400K home with 5% down, PMI runs roughly $190-$475/mo until you reach 20% equity.

The costs everyone forgets

Three categories most online calculators silently exclude:

Maintenance and unexpected repairs

The industry rule of thumb is 1-2% of home value per year. On a $400K home, that's $4,000-$8,000/year — money you should be setting aside, not spending. Some years you'll spend $0. Some years your HVAC dies and you spend $9,000 in one weekend. Average it across a decade and the 1% rule shakes out about right for normal homes; older homes lean closer to 2%.

Property tax variation

The national average is 1.1% of assessed value. But Texas is 1.6%, New Hampshire is 1.9%, Illinois is 2.0%. California is 0.7% but houses are 3× more expensive, so the dollar amount is still huge. Always check the actual rate for your specific city — Zillow listings usually surface it.

Closing costs

2-5% of the home price, paid at signing. On a $400K home that's $8,000-$20,000 in addition to the down payment. Buyers often forget closing costs entirely when budgeting, then end up financing them via a higher loan amount (which raises P+I forever after) or scrapping the down payment to cover them (which triggers PMI).

The honest answer

Run this 4-step exercise:

1. Take your gross monthly household income × 0.25 — note this number.
2. Subtract your monthly non-mortgage debt obligations (car, student loans, credit-card minimums) from that number.
3. The result is the realistic all-in monthly cost (PITI + maintenance + HOA) your household can sustain comfortably.
4. Back into a home price by subtracting estimated tax / insurance / maintenance / HOA, leaving the principal-and-interest budget that maps to a home price at current rates.

A worked example for a household making $120,000 ($10,000/mo gross):

• Step 1: 25% × $10,000 = $2,500/mo housing budget
• Step 2: $400 car + $300 student loans = $700/mo other debt. $2,500 - $700 = wait, that's wrong direction — the 25% is housing only, not total debt. Let me restate: $2,500/mo is the housing target. Your non-housing debt should ideally already fit comfortably in the remaining 75% of income.
• Step 3: $2,500/mo all-in = ~$1,750 PITI + ~$300 maintenance + ~$400 reserve for tax/insurance/HOA variance.
• Step 4: $1,750 P+I at 7% on a 30-year loan ≈ $263,000 mortgage. Add 20% down ($66K), buy a ~$329,000 home.

That's notably lower than what a lender would pre-approve this household for ($500K+ if their DTI allows). The lender's number is "the maximum that won't trigger a foreclosure"; this calculator's number is "the maximum that leaves you with breathing room."

The case for being more conservative than 25%

A few situations argue for going below the 25% housing target:

• You're saving for retirement at 15%+ of income. Compounding for retirement matters more than home-equity buildup for most people under 50. Don't sacrifice the 401(k) match for a bigger house.
• You have any chance of moving in under 5 years. Closing costs + selling costs (6% realtor fees + 1-2% other costs) take 5-7 years to recoup. Buy small for short stays; buy big only when you're committed to 7+ years.
• You're self-employed or have variable income. Mortgage payments are non-negotiable; income isn't. The 18-20% range is safer than 25% when your income could drop next quarter.

The case for stretching above 25%

Real cases where it can make sense:

• You're early-career with strong income trajectory. A house that's 30% of income today becomes 22% in 4 years if your income grows 10% per year. Just make sure you're not betting on the trajectory before it's proven.
• You live in a very high cost-of-living area. In SF / NYC / Boston / Seattle, 35-40% housing is sometimes the only path to ownership. The compensating factor is you usually earn proportionally more — but also save proportionally more aggressively to make it work.
• You're buying significantly below your "lender max" anyway. Stretching to 30% of income on a $400K home when you could afford $600K is a different calculation than stretching to 50% on a $700K home.

What to do this week

• Run your real numbers through the Money Scale rent-vs-buy calculator. It accounts for property tax, maintenance, and the opportunity cost of the down payment sitting in a wall instead of an index fund.
• If you're seriously house-shopping, get pre-approved by 2 lenders for comparison. They'll quote rates within 0.25% of each other but the closing-cost details matter.
• Don't max out your pre-approval. The lender's number is the ceiling, not the target. Aim for the bottom of the range they qualify you for.
• Before signing anything, check the CFPB's Closing Cost Estimator — the surprise at closing is a real and large category of homebuyer regret.

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Educational only — not financial or legal advice. Mortgage rates, tax rates, and lending standards change month to month; the figures cited above reflect 2026 averages and your local market will vary. Work with a HUD-approved housing counselor or a fee-only fiduciary for advice specific to your situation.