How Much House Can I Afford on My Salary?

Keep an emergency fund after closing costs—house poor households fail the cash test first. Try the emergency fund calculator.

The 28/36 rule of thumb#

Many modern loan programs allow higher DTI with compensating factors. FHA, conventional, and VA guidelines differ. Treat 28/36 as a budget stress test, not the law.

Worked hypotheticals (not your rate)#

Assumptions labeled clearly: gross income only; ignore PMI, HOA, and state taxes for the sketch; interest rates change daily.

Example A — $72,000 salary#

• Gross monthly income: $72,000 ÷ 12 = $6,000
• 28% housing sketch: 0.28 × $6,000 = $1,680/month PITI
• 36% total debt sketch: 0.36 × $6,000 = $2,160/month for housing + other debts

If car + student loans already take $500, housing room under the back-end sketch is about $1,660—close to the front-end number. A lender may still approve differently.

Example B — $120,000 household income#

• Gross monthly: $10,000
• 28% housing sketch: $2,800/month PITI
• 36% total debt sketch: $3,600/month

Convert a PITI budget into a purchase price only after you know rate, term, taxes, insurance, and down payment. Online “max home price” widgets hide those inputs.

Cash you need beyond the mortgage#

• Down payment (3%–20%+ depending on program)
• Closing costs
• Moving / immediate repairs
• Reserves (often months of PITI—program-specific)
• Ongoing maintenance (a common household heuristic is 1% of home value per year, not a rule)

Draining every dollar into the down payment and skipping emergency cash is how a roof leak becomes credit-card debt.

Affordability checklist#

1. Run take-home budgets with 50/30/20 or zero-based—gross DTI can lie
2. Stress-test a 1–2% higher mortgage rate
3. Price taxes and insurance from local realities, not national averages
4. Get preapproved; do not shop with a blog ceiling alone
5. Keep credit utilization and scores healthy (credit utilization)

Gross DTI vs what your kitchen table can afford#

Lenders often underwrite on gross income because it is verifiable on W-2s and tax returns. Your household lives on take-home pay after taxes, health premiums, 401(k) deferrals, and child care. A loan approval at 35% back-end DTI can still feel tight if child care consumes 20% of net pay.

Practical merge:

• Run the 28/36 sketch on gross for comparability with loan officers.
• Run 50/30/20 or zero-based on net to see whether “needs” still leave room for savings and irregular bills.
• Add a home maintenance line even before you buy—if the sketch leaves zero margin, the approved payment is not sustainable.

Hypothetical: Two households both earn $90,000 gross and get approved near the same PITI. Household A has $400/month student loans and no child care; Household B has $900/month child care and a car payment. The same front-end ratio means different stress. Back-end DTI captures some of that; your budget should capture all of it.

Variable income, bonuses, and self-employment#

If income bounces (commission, overtime, seasonal work, 1099 contracts), lenders may use two-year averages or discount unstable components. For your planning:

• Base the 28/36 test on conservative income—the lowest realistic year, not your best bonus quarter.
• Keep extra months of emergency cash if commissions can pause; a mortgage does not pause with them.
• Document deposits before applying; large unexplained transfers slow underwriting.

Self-employed borrowers face additional documentation (tax returns, profit-and-loss). The rule of thumb still helps as a ceiling, but the binding constraint is often what underwriters count, not what you hope to bill next year.

Rent vs buy: process, not a verdict#

This page focuses on purchase PITI. A calm rent-vs-buy comparison usually includes:

• Horizon — Closing costs amortize over years; a likely move in 24 months makes buying harder to justify on math alone (transaction costs, not ideology).
• All-in housing cost — Rent includes some maintenance implicitly; owners pay repairs, HOA, and sometimes higher insurance in hazard-prone areas.
• Opportunity cost of down payment — Not a guaranteed return either way; ask whether down payment dollars would otherwise pay high-APR debt or build retirement on schedule.
• Stability needs — School districts, commute, and family size matter alongside spreadsheets.

Neither rent nor buy wins universally. Use 28/36 to see if a purchase fits; use net budgeting to see if this purchase fits you.

After preapproval: avoid payment creep#

Preapproval is a range, not a target. Sales pressure often anchors you to the top. Common post-approval mistakes:

• Picking the longest term to maximize house price without noticing total interest
• Treating escrow estimates as final—tax reassessments after purchase can raise PITI
• Buying furniture and appliances on credit before closing, shifting DTI at the last minute
• Skipping the final walk-through and reserve cash for immediate fixes

Re-run the 28/36 sketch with the actual rate lock, tax quote, and insurance binder—not the teaser in the first online calculator.

Sources#

• Consumer Financial Protection Bureau resources on mortgages, capacity, and shopping for a loan officer.
• Common 28/36 DTI heuristics used in U.S. housing education (guideline only).
• FDIC/CFPB household guides on budgeting for housing costs alongside emergency savings.