Quick Answer
Most lenders will approve you for a home priced at roughly 3 to 4.5 times your gross annual income, depending on your debts, down payment and interest rates. On an $80,000 salary, that’s a home between $240,000 and $360,000 — but the real answer depends on five numbers, not one.
Get your own number in about 30 seconds with our Home Affordability Calculator — it applies the same 28/36 rule lenders use.
Jump straight to the numbers with our free Home Affordability Calculator — it applies the exact rule lenders use.
The 28/36 Rule: How Lenders Decide
Banks use two debt-to-income (DTI) caps:
• Front-end ratio (28%): your total housing cost — mortgage payment, property taxes and homeowners insurance — should stay under 28% of your gross monthly income.
• Back-end ratio (36%): housing cost plus all other debt payments (car loans, student loans, credit card minimums) should stay under 36%.
Your buying power is capped by whichever limit binds first. If you carry significant debt, the 36% cap hits before the 28% cap — and every extra $100 of monthly debt reduces your buying power by roughly $15,000–$20,000 at today’s rates.
Real Examples at Different Salaries
Assumptions: 6.5% interest rate, 30-year loan, 20% down, $400/month for taxes and insurance, no other debts.
• $50,000 salary: ≈ $1,167/month housing budget → loan ≈ $185,000 → home price ≈ $230,000
• $80,000 salary: ≈ $1,867/month → loan ≈ $296,000 → home price ≈ $370,000
• $120,000 salary: ≈ $2,800/month → loan ≈ $444,000 → home price ≈ $555,000
Add a $500/month car payment and each figure drops by roughly $80,000. Run your exact numbers in the affordability calculator.
What Raises Your Buying Power
• Bigger down payment. Every extra dollar is a dollar you don’t need to borrow — and 20% down avoids PMI entirely.
• Paying down debt before applying. This moves the 36% ceiling faster than anything else.
• Better credit score. Moving from 640 to 760+ can cut your rate by a full percentage point, worth about 10% more buying power.
Don’t Spend the Maximum
Approval is based on gross income — it doesn’t know about childcare, retirement savings, or that your car needs new tires. Many financial planners suggest staying 10–15% below your maximum approval. A house you can barely afford is a house that owns you.
FAQ
Can I afford a house making $40,000 a year? Yes, in most markets — expect a budget around $150,000–$190,000 with minimal debt. In high-cost metros that may mean condos or townhomes rather than single-family houses.
Does my down payment affect affordability? Directly. Your max price = max loan amount + down payment. A larger down payment also shrinks your monthly payment, which can push your loan ceiling higher.
Do lenders count my spouse’s income? Yes, if you apply jointly — their debts count too. Combined income with combined debt often nets out to less buying power than expected.
This article is for educational purposes only and is not financial advice. See our full disclaimer.
Related Reading
- 15-Year vs 30-Year Mortgage — what a shorter term does to your monthly payment.
- When to Refinance Your Mortgage — the math on trading your current rate for a lower one.