How Much House Can I Afford on Your Salary? (US + UK Guide)

Quick answer: On a $100,000 salary, the classic 28/36 rule says you can afford roughly a $340,000 home with 20% down at a 7.40% mortgage rate — about $2,333 a month in total housing costs. That number is a ceiling, not a target. What a lender approves you for is usually higher than what your monthly budget can comfortably carry, and that gap is where most buyers get into trouble.

I have watched friends make the same mistake twice now. They walk into a bank, get pre-approved for a number that feels like a lottery win, and then spend six months house-hunting at the very top of that number. Then the first property tax bill arrives, the water heater dies, and suddenly the "dream home" payment eats everything. A pre-approval tells you what a lender is willing to risk. It does not tell you what your life can afford.

This guide fixes that. You will learn the rule lenders actually use, run the numbers on your own salary, and see the four things that quietly move your price up or down by tens of thousands of dollars. I ran every figure below with a standard mortgage formula at October 2026 rates, and I will show you the assumptions so you can check my work.

The 28/36 rule, in plain English

Most US lenders judge affordability with two ratios, called the 28/36 rule:

• 28% — the housing ratio. Your total monthly housing payment (principal, interest, property taxes, and homeowners insurance, often shortened to PITI) should stay under 28% of your gross monthly income.
• 36% — the debt ratio. All of your monthly debt payments combined — housing plus car loans, student loans, credit card minimums, anything else — should stay under 36% of your gross monthly income.

Your real limit is whichever ratio gives you the smaller number. If you have no other debts, the 28% rule governs. If you carry a $600 car payment and a $300 student loan, the 36% rule takes over and quietly shrinks your budget.

A worked example on $100,000

Take a $100,000 salary. Gross monthly income is $8,333. Twenty-eight percent of that is $2,333 — that is your total monthly housing budget.

Now work backwards at a 7.40% 30-year fixed rate (roughly where Freddie Mac's survey sat in October 2026), with 20% down, property tax at 1.1% of the price per year, and insurance at 0.5%:

• Monthly housing budget: $2,333
• Home price that fits: about $340,000
• Down payment (20%): $68,000
• Loan amount: $272,000
• Principal and interest: about $1,881 a month
• Taxes and insurance: the remaining ~$452 a month

Notice what happened there. The mortgage itself is only part of the payment. Taxes and insurance take roughly a fifth of the budget before you have paid a cent of principal. Buyers who budget from the loan payment alone always overshoot.

How much house can you afford by salary?

Using the same assumptions — 7.40% fixed for 30 years, 20% down, property tax 1.1%, insurance 0.5%, no other debts — here is what the 28% rule supports:

Annual salary	Max monthly housing (28%)	Rough home price
$50,000	$1,167	~$170,000
$75,000	$1,750	~$255,000
$100,000	$2,333	~$340,000
$125,000	$2,917	~$424,000
$150,000	$3,500	~$509,000
$200,000	$4,667	~$679,000

As a rough shortcut, at today's rates that works out to about 3 to 3.5 times your salary with 20% down. The old "five times your salary" advice comes from an era of 3% rates. At 7.4%, it will wreck your budget.

One more reality check. A household earning the US median income of about $80,734 can afford roughly $272,000 under this rule, while the median American home is valued around $333,000. That gap is not a personal failure. It is the market in late 2026, and it is why so many buyers are waiting, saving a bigger down payment, or looking at smaller homes than they planned.

What a lender approves vs what you can afford

Here is the part nobody explains at the open house. Many lenders will stretch your total debt ratio to 43%, and some loan programs go as high as 50%. On that same $100,000 salary, a 43% approval could push your housing payment toward $2,900 a month and your price well past $400,000.

That approval is real money you would actually have to pay, every month, for 30 years. The lender's risk model does not know about your childcare costs, your car that is about to die, or the fact that you like eating out more than twice a month. Your budget knows. When I helped a friend run his numbers last year, his approval letter said $480,000. His honest budget said $360,000. He bought at $350,000 and still texts me about how glad he is when something breaks.

My rule of thumb: treat the 28/36 number as your ceiling and shop 10% under it. The breathing room is worth more than the extra bedroom.

The four things that move your number

1. Your down payment

On that $100,000 salary example, dropping from 20% down to 5% down does two things at once: it raises your loan amount, and it adds private mortgage insurance (PMI), which is an extra monthly cost until you build 20% equity. The same $2,333 budget then buys noticeably less house — roughly $60,000 less in my calculation. Saving longer for 20% is painful, but it is the single biggest lever most buyers have.

2. Your other debts

Go back to the 36% rule. On $100,000, your total debt ceiling is $3,000 a month. If you already pay $600 for a car and $300 in student loans, only $2,100 remains for housing — not $2,333. Your affordable price drops by roughly $35,000. Paying off a car before house-hunting is often worth more than a raise.

3. The mortgage rate

Rates are the lever you cannot control, and they are brutal. On a $320,000 loan, a quarter-point rise (say 7.40% to 7.65%) adds about $55 a month — roughly $19,800 in extra interest over 30 years. A full point move shifts your affordable price by tens of thousands. This is why buyers in 2026 feel poorer than buyers in 2021 on the same salary. It is not imagination; it is arithmetic.

4. Taxes and insurance where you live

Property tax is the silent budget-killer. The same $340,000 house costs far more per month in New Jersey or Illinois than in Alabama, because the tax line alone can double. Before falling in love with a listing, look up the actual tax bill for that address on the county assessor's site. Listing sites show estimates. The assessor shows the truth.

Buying in the UK? The maths is different

If you are reading this from the UK, forget 28/36. British lenders work mainly from an income multiple: most high-street lenders will lend up to around 4.5 times your annual income, subject to an affordability stress test (they check you could still pay if rates rose).

On a £40,000 salary, 4.5 times income is a £180,000 mortgage. With a 10% deposit, that buys roughly a £200,000 home. Deposits matter even more in the UK because the rate you are offered usually improves at 85% and 75% loan-to-value. A 10% deposit gets you in the door; a 25% deposit gets you a meaningfully cheaper monthly payment.

The principle is identical on both sides of the Atlantic: the lender's maximum is not your budget. Run your own monthly number first.

Work out your number in four steps

1. Write down your gross monthly income. Annual salary divided by 12, before tax. Use your household total if you are buying jointly.
2. Multiply by 0.28. That is your total monthly housing ceiling, taxes and insurance included.
3. Add up your other monthly debts (car, student loans, credit card minimums). Multiply your gross monthly income by 0.36 and subtract those debts. If that number is smaller than step 2, it is your real ceiling.
4. Turn the monthly payment into a price. Use our Loan Calculator: enter your ceiling as the target monthly payment and adjust the loan amount until the payment matches, then add your down payment to get the home price. Always budget taxes and insurance on top of principal and interest.

Five mistakes that cost buyers real money

1. Shopping at the pre-approval number. Covered above, and still the most common mistake. Approval is a maximum, not a recommendation.

2. Forgetting closing costs. Budget another 2–5% of the price for closing costs, on top of your down payment. On a $340,000 home, that is $6,800 to $17,000 many first-time buyers have not saved.

3. Ignoring PMI. Less than 20% down means PMI, often $100–$300 a month, until you reach 20% equity. Factor it in from day one.

4. Skipping the emergency fund. If buying empties your savings to zero, the first broken furnace turns into credit card debt. Keep three to six months of expenses aside, separate from your down payment.

5. Trusting the listing site's monthly estimate. Those estimates use generic tax and insurance figures. Check the county tax record and get a real insurance quote for the actual address.

Frequently asked questions

How much house can I afford on $80,000 a year?

Using the 28% rule, about $1,867 a month in total housing costs, which supports roughly a $272,000 home with 20% down at a 7.40% rate. With other debts, the number falls — run the 36% check before trusting the headline figure.

Is the 28/36 rule a law?

No. It is a guideline most US lenders use, and many will lend beyond it. Treat it as a sanity check for your own budget, not as something a lender enforces for your benefit.

How much down payment do I really need?

Conventional loans can go as low as 3% down, FHA loans 3.5%, and VA and USDA loans 0% for eligible buyers. But less than 20% down usually means PMI, and a bigger down payment almost always means a smaller monthly payment.

Does my credit score change how much house I can afford?

Indirectly, yes. Your score does not change the 28/36 maths, but it changes the rate you are offered — and as shown above, even a quarter-point rate difference moves your monthly payment and your affordable price.

Should I buy points to lower my rate?

Sometimes. One point (1% of the loan) typically cuts your rate by about 0.25%. On a $400,000 loan, that is $4,000 upfront to save roughly $70 a month. It pays for itself if you stay in the home and keep the loan for roughly five years. If you might move sooner, keep the cash.

Try it with your own numbers: open our free Loan Calculator, enter a home price and rate, and see your monthly payment, total interest, and total cost instantly — no signup.

The honest version of this whole article fits in one sentence: buy the home whose monthly payment still leaves you a life, not the most expensive home a lender will let you sign for. Run your own numbers, keep the emergency fund intact, and let the 28/36 rule argue with your excitement before you make an offer. That discipline is unglamorous, and it is exactly what keeps a house a home instead of a burden.

Disclaimer: All figures in this article are estimates for education only, based on the stated assumptions (7.40% 30-year fixed rate, 20% down unless noted, property tax 1.1% and insurance 0.5% per year). Actual rates, taxes, and lender requirements vary by location and borrower. This is not financial advice — speak to a qualified mortgage adviser before making a purchase decision.