House Affordability Calculator

How Much Can I Afford? Understanding House Affordability

Buying a home is one of the biggest financial decisions most people will ever make. Whether you're a first-time buyer or planning your next move, understanding "how much house you can afford" is essential. House affordability refers to the amount of money you can reasonably spend on purchasing a home without jeopardizing your financial stability. It includes more than just the purchase price — it accounts for your income, debts, mortgage rates, down payment, and even property taxes and insurance.

Why House Affordability Matters

House affordability isn't just a budgeting exercise — it's a roadmap for your financial safety. Buying more house than you can afford can lead to years of financial stress or even foreclosure. On the flip side, underestimating your budget might mean missing out on a better living space that you could’ve comfortably afforded.

Several key factors determine your home affordability:

• Income: Your gross monthly income is the foundation. Lenders usually recommend that your monthly housing costs not exceed 28% of your income.
• Debt-to-Income (DTI) Ratio: Total monthly debts (credit cards, car loans, student loans) should generally be below 36% of your gross income.
• Down Payment: A larger down payment lowers your loan size and potentially gets you better mortgage terms.
• Interest Rates: Even small changes in mortgage rates can significantly affect your monthly payment.
• Loan Term: A 30-year mortgage gives you lower monthly payments, while a 15-year mortgage saves on interest but costs more monthly.
• Property Taxes and Insurance: These vary by state and city and add to your monthly cost.

Real-World Examples of Home Affordability

Let’s look at a couple of scenarios using real data from 2025.

Middle-Income Buyer in the U.S.

Name: Sarah
Location: Phoenix, Arizona
Income: $75,000/year
Monthly Debt Payments: $500 (student loan + car)
Interest Rate: 6.75% (30-year fixed mortgage)
Down Payment: $30,000

Estimation:

• 28% of her monthly income ($6,250) is $1,750
• Subtracting debt, her DTI is 32% — acceptable for most lenders
• With a $30K down payment and $1,750/month budget, Sarah can afford a house around $280,000–$300,000

In Phoenix, the median home price as of early 2025 is around $395,000 — so Sarah may need to explore suburbs or look for condos to stay within budget.

High Earner in New York

Name: David
Location: Brooklyn, NY
Income: $140,000/year
Monthly Debts: $2,000
Interest Rate: 6.9%
Down Payment: $100,000

Estimation:
David’s monthly income is $11,667

• 28% = ~$3,266
• After debt, his affordability leans closer to $3,000/month
  This puts his house budget near $500,000–$550,000, assuming conventional loan terms.

That may not buy a brownstone in Brooklyn, but it could buy a 1-bed condo or a 2-bed home in nearby boroughs like Queens.

Tips to Improve House Affordability

If your dream home feels just out of reach, here are a few practical ways to boost what you can afford:

• Reduce Debts: Lower monthly obligations means more room in your DTI ratio.
• Improve Credit Score: Higher credit scores often mean lower interest rates.
• Increase Down Payment: A larger upfront payment reduces your loan amount and monthly payments.
• Consider Different Locations: Some areas are significantly more affordable than others.
• Extend Loan Term: A 30-year mortgage lowers monthly payments, though you'll pay more in total interest.

Frequently Asked Questions About House Affordability

How much can I afford for a house?

It depends on your income, debts, and down payment. A general rule is that your monthly mortgage payment should not exceed 28% of your gross income. Use a calculator to estimate based on your own numbers.

How much mortgage can I afford based on my salary?

Most lenders use the 28/36 rule: no more than 28% of your gross income on housing and 36% on total debt. For example, if you earn $60,000/year, aim for a monthly mortgage around $1,400–$1,600.

How much can I afford on a home with student loans?

Student loans count toward your debt-to-income ratio. If your DTI exceeds 36%, lenders may reduce the amount they’ll offer, so either reduce debt or increase income before buying.

How much rent can I afford instead of buying?

If you're renting, the standard advice is to spend no more than 30% of your gross income. On a $50,000 salary, that's around $1,250/month in rent.

Is it better to rent or buy if I can’t afford a house?

Buying isn’t always the best option. If your finances aren’t ready (low credit score, high debt), renting might give you time to save and improve your position.

What if mortgage rates keep rising?

Higher interest rates reduce how much you can afford. If rates are going up, consider locking in a rate or reducing the loan size by saving more for a down payment.

Can I afford a house without a 20% down payment?

Yes. Many buyers put down 5–10%, but this may trigger private mortgage insurance (PMI), adding to your monthly cost.