Home buying
How Much House Can You Afford?
Lenders use the 28/36 rule: spend no more than 28% of your gross monthly income on housing, and no more than 36% on all debt combined. On a $90,000 salary, that means about $2,100 a month for housing - roughly a $395,000 home with 20% down at a 7% mortgage rate (close to the US 30-year fixed average, which was about 7.4% in early October 2026). Here is how the math works and where the rule bends.
The 28/36 rule, explained
The front-end ratio caps your total housing payment at 28% of gross monthly income (before taxes). The back-end ratio caps all monthly debt payments - housing plus car loans, student loans, and credit card minimums - at 36%. Some lenders stretch the back-end ratio to 43-45% for well-qualified borrowers, but 36% is the traditional comfort zone.
Your "housing payment" means PITI: principal and interest on the mortgage, plus property taxes and homeowners insurance. Lenders also add HOA dues and mortgage insurance (PMI) if applicable. Every one of those comes out of the same 28%.
Worked example: a $90,000 salary
From paycheck to price tag
- Gross monthly income: $90,000 / 12 = $7,500
- Housing budget (28%): $7,500 x 0.28 = $2,100/month
- At a 7% 30-year fixed rate, each $1,000 borrowed costs $6.65/month in principal and interest
- Maximum loan: $2,100 / $6.65 x $1,000 = $315,650
- With 20% down, home price: $315,650 / 0.80 = $394,560 - about $395,000
The back-end check: 36% of $7,500 is $2,700 for all debts. If you already pay $600/month in car and student loans, only $2,100 remains for housing - the ratios agree in this case, but existing debt is what most often shrinks a buyer's budget.
Reality adjustment: property tax and insurance come out of the $2,100 too. In a high-tax area where taxes and insurance run $500/month, only $1,600 is left for principal and interest - supporting roughly a $240,000 loan instead.
What else eats your budget
The mortgage payment is only the headline. Plan for a down payment of 3-20% or more (under 20% usually means PMI, around 0.5-1% of the loan per year), closing costs of 2-5% of the price, maintenance averaging about 1% of the home's value per year, and moving and furnishing costs. Lenders also want to see cash reserves after closing - typically 2-6 months of payments.
Put numbers on it: on a $395,000 purchase, closing costs of 2-5% mean $7,900 to $19,750 due at signing on top of your down payment. Put down 10% instead of 20% and PMI adds roughly 0.5-1% of the loan amount per year - about $150-$300 a month - until you reach 20% equity. These are the costs that turn an "affordable" payment into a cash-flow crunch, so budget them before you fall in love with a house.
Inside that 2-5% closing figure sit the appraisal ($300-$600), home inspection ($300-$500), title insurance and search, origination fees, and prepaid taxes and insurance. Ask your lender for the standardized Loan Estimate early - it itemizes every fee, and you can (and should) shop around for several of them.
When to bend the rule
In high-cost cities, buyers with strong incomes and no other debt routinely stretch toward 30-33% on housing - lenders allow it, but your margin for surprises shrinks. Going the other direction, holding housing near 25% of gross leaves room for aggressive saving, kids, or a single-income stretch. The right number also depends on income stability: a freelancer with lumpy income should be more conservative than a tenured employee with the same salary.
Key takeaways
- Housing at or under 28% of gross monthly income; all debts at or under 36%.
- $90,000 salary at 7% rates supports roughly a $395,000 home with 20% down - before taxes and insurance.
- PITI (principal, interest, tax, insurance) plus HOA and PMI all count toward the 28%.
- Budget 2-5% of the price for closing costs and ~1% of value per year for maintenance.
- Existing car, student loan, and card payments reduce your housing budget dollar for dollar.
Frequently asked questions
Is the 28% based on gross or net income?
Gross - your income before taxes and deductions. Because taxes take a real bite, many buyers find 28% of gross feels tighter than expected and aim a bit lower for comfort.
How much down payment do I really need?
Twenty percent avoids private mortgage insurance, but it is not required: conventional loans allow as little as 3-5% down, and FHA loans 3.5%. Smaller down payments mean a bigger loan, higher payment, and PMI - run the numbers both ways.
What credit score do I need for a mortgage?
About 620 is the practical minimum for most conventional loans; FHA can go to 580 (or 500 with 10% down). The best rates typically require 740 or higher - a 40-point score difference can easily cost 0.25% in rate.
Do HOA dues count in the 28%?
Yes. Lenders include HOA dues, and any mortgage insurance, in your housing payment when computing the ratios. A $400/month HOA reduces your borrowing power by roughly $60,000 at 7% rates.
Try it yourself
Run your own numbers with our free calculator: