With home prices averaging $412,000 and mortgage rates around 6.5% in 2026, figuring out how much house you can afford requires careful calculation. Here are the rules that lenders and financial advisors use.
The 28/36 Rule
The most widely used affordability guideline says your monthly housing costs (mortgage, taxes, insurance) should not exceed 28% of your gross monthly income. Your total monthly debt payments should not exceed 36%. For a household earning $100,000/year, that means a maximum housing payment of about $2,333/month.
How Much Down Payment Do You Need?
While 20% down is ideal (it eliminates PMI), it is not required. FHA loans require just 3.5% down, VA loans require 0%, and conventional loans can go as low as 3%. However, lower down payments mean higher monthly payments and PMI costs of $100-300/month.
Hidden Costs of Homeownership
Your mortgage payment is just the beginning. Budget for property taxes (1-2% of home value per year), homeowner insurance ($100-300/month), maintenance (1% of home value per year), and potential HOA fees. A $400,000 home truly costs $2,500-3,000/month all-in, not just the $1,770 mortgage payment.