A useful home budget starts with the monthly payment, not a headline price. Lenders look at your mortgage payment, other debts, credit profile, down payment, and reserves. The 28/36 rule gives you a conservative starting point, but your real approval number can land above or below it.
The 28/36 rule
The 28/36 rule keeps housing costs near 28% of gross monthly income and total debt payments near 36%. It is not a lender requirement, but it leaves room for repairs, insurance hikes, and normal life.
What lenders look at
- Your debt-to-income ratio, including the new mortgage payment.
- Your credit score and recent credit history.
- Your down payment, cash reserves, and documented assets.
Affordability by income
| Annual income | Estimated max home price |
|---|---|
| $50,000 | $185,000 |
| $75,000 | $280,000 |
| $100,000 | $375,000 |
| $150,000 | $560,000 |
Assumes 20% down, a 7% rate, 36% back-end DTI, and $0 in existing debt.
How to increase your buying power
- Pay down monthly debt before you apply.
- Save more down so the loan and PMI shrink.
- Improve your credit before you rate shop.
Calculate your affordability →
Frequently asked questions
What is a good debt-to-income ratio for buying a home?
Most lenders like to see back-end DTI under 36%. Conventional loans may allow 45-50% when the rest of the file is strong, such as excellent credit and large reserves.
Does the 28/36 rule still apply today?
Yes, as a conservative guardrail. Many lenders approve loans at 43-50% DTI, but staying closer to 36% leaves more cushion for maintenance, insurance, and everyday expenses.
How does down payment size affect how much I can afford?
A larger down payment lowers the loan amount and monthly P&I. At 20% down, it also removes PMI, often saving 0.5-1% per year. Each extra 5% down can lift buying power by roughly 5-7%.
Can I afford a home on a single income?
Yes. Many single-income buyers qualify, especially in lower-cost markets. The key is keeping total debt, including the mortgage, under 36-43% of gross monthly income.
Methodology note: Affordability examples use the 28/36 rule, a 7% mortgage rate, 20% down payment, and no existing debt.