How Much Can I Afford to Borrow for a Mortgage in 2025? 🏠
Complete Affordability Calculator + 28/36 Rule Explained
Quick Answer: Your monthly mortgage should not exceed 28% of gross income, and total debts should not exceed 36%.
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Calculate My Exact Affordability →📊 The 28/36 Rule Explained (With Real Examples)
The 28/36 rule is the gold standard used by lenders to determine how much you can afford to borrow. Here's what it means:
28% Rule (Front-End Ratio)
Your housing costs should not exceed 28% of your gross monthly income.
Housing Costs Include:
- • Principal & Interest (P&I)
- • Property Taxes
- • Homeowners Insurance
- • HOA Fees (if applicable)
- • PMI (if less than 20% down)
36% Rule (Back-End Ratio)
Your total monthly debts should not exceed 36% of your gross monthly income.
Total Debts Include:
- • All housing costs (above)
- • Car loans/leases
- • Credit card minimum payments
- • Student loans
- • Personal loans
- • Child support/alimony
💰 Real Examples: How Much Can YOU Afford?
Example 1: $60,000 Annual Income
Your Situation:
- • Annual income: $60,000
- • Monthly gross income: $5,000
- • Current debts: $300/month (car loan)
- • Down payment: 20%
- • Interest rate: 6.19%
What You Can Afford:
- • Max housing costs: $1,400/month (28%)
- • Max total debts: $1,800/month (36%)
- • Available for housing: $1,500/month ($1,800 - $300 debts)
- • Home price: $220,000-$230,000
Monthly Payment Breakdown: $1,400 total = $1,100 P&I + $200 property tax + $100 insurance
Example 2: $100,000 Annual Income
Your Situation:
- • Annual income: $100,000
- • Monthly gross income: $8,333
- • Current debts: $500/month (car + credit cards)
- • Down payment: 20%
- • Interest rate: 6.19%
What You Can Afford:
- • Max housing costs: $2,333/month (28%)
- • Max total debts: $3,000/month (36%)
- • Available for housing: $2,500/month ($3,000 - $500 debts)
- • Home price: $370,000-$390,000
Pro Tip: With this income, you could also consider a $400,000 home with slightly higher payment. Get personalized quotes to see your exact options.
Example 3: $150,000 Annual Income
Your Situation:
- • Annual income: $150,000
- • Monthly gross income: $12,500
- • Current debts: $800/month (car + student loans)
- • Down payment: 20%
- • Interest rate: 6.19%
What You Can Afford:
- • Max housing costs: $3,500/month (28%)
- • Max total debts: $4,500/month (36%)
- • Available for housing: $3,700/month ($4,500 - $800 debts)
- • Home price: $550,000-$580,000
Luxury Option: At this income level, you may qualify for jumbo loans up to $600,000+. Rates are often LOWER than conventional loans.
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🔍 Factors That Affect How Much You Can Borrow
1. Debt-to-Income Ratio (DTI)
Most important factor. Lower DTI = more borrowing power. Pay off credit cards and car loans before applying to maximize your budget.
Example: Paying off $500/month in credit card debt frees up $500/month for housing, increasing your home budget by $75,000-$90,000!
2. Credit Score
Higher credit score = lower interest rate = more borrowing power. A 740+ score gets best rates, potentially saving $100-200/month vs 680 score.
Impact: 740 score at 6.19% vs 680 score at 6.69% = $120/month difference on $400K loan ($43,200 over 30 years)
3. Down Payment
Larger down payment = lower monthly payment = more affordable. 20% down also eliminates PMI ($100-200/month savings). If you're working on saving more, explore down payment assistance programs that can help.
Options: Conventional (3% down), FHA (3.5% down), VA (0% down), USDA (0% down)
4. Interest Rate
Every 0.5% rate difference changes your budget by $50,000-$75,000. Shop multiple lenders to find the best rate.
Example: 6.19% vs 5.69% on $400K loan = $120/month savings = $75,000 more home you can afford
5. Employment & Income Stability
Lenders prefer 2+ years in same job/industry. Self-employed? Need 2 years of tax returns showing consistent income.
⚠️ Common Mistakes to Avoid
1. Maxing Out Your Budget
Just because you CAN borrow $400K doesn't mean you SHOULD. Leave buffer for unexpected expenses, repairs, property tax increases. Many experts recommend 25% of income instead of 28%.
2. Forgetting About Closing Costs
Budget 2-5% of purchase price for closing costs ($8,000-$20,000 on $400K home). Don't drain your savings - keep 3-6 months emergency fund after closing.
3. Ignoring Property Taxes & Insurance
These vary WILDLY by location. Texas: 1.8% property tax. California: 0.76%. Always include in your calculations or you'll be shocked by your actual monthly payment.
4. Not Shopping Multiple Lenders
Rates vary 0.25-0.5% between lenders. On $400K loan, 0.5% = $120/month ($43,200 over 30 years). Spend 2 hours comparing = save $43K. Best ROI ever.
❓ Frequently Asked Questions
How much can I afford to borrow for a mortgage?
General rule: Your monthly mortgage payment should not exceed 28% of your gross monthly income (front-end ratio), and your total monthly debts should not exceed 36% (back-end ratio). For example, with $6,000/month income, you can afford $1,680/month for mortgage and $2,160/month for all debts combined.
What is the 28/36 rule for mortgages?
The 28/36 rule states: (1) Your housing costs (mortgage, taxes, insurance) should not exceed 28% of gross monthly income, (2) Your total debt payments (housing + car + credit cards + student loans) should not exceed 36% of gross monthly income. This is the standard used by most conventional lenders.
How much house can I afford with a $100,000 salary?
With $100,000 annual salary ($8,333/month), assuming 6.19% rate, 20% down, $500/month debts, and $300/month property taxes + insurance: You can afford approximately $350,000-$380,000 home. Your monthly mortgage payment would be around $2,333 (28% of gross income).
What income do I need to buy a $400,000 house?
For a $400,000 home with 20% down ($80,000), 6.19% rate, you need approximately $100,000-$110,000 annual income ($8,333-$9,167/month). This assumes minimal other debts and follows the 28/36 rule. Monthly payment would be $2,449 + taxes/insurance.
How do lenders calculate how much I can borrow?
Lenders use: (1) Debt-to-Income Ratio (DTI) - total monthly debts divided by gross monthly income, (2) Front-end ratio - housing costs only divided by income, (3) Credit score - affects rate and approval, (4) Down payment - larger down payment = more borrowing power, (5) Employment history - 2 years stable income preferred.
Can I afford a house with $60,000 income?
Yes! With $60,000 annual income ($5,000/month), you can afford approximately $200,000-$230,000 home with 20% down. Monthly payment would be around $1,400 (28% of income). Consider FHA loans (3.5% down) to reduce upfront costs if you have limited savings.
What if my debt-to-income ratio is too high?
Options: (1) Pay down debts before applying (credit cards, car loans), (2) Increase income (side hustle, raise, second job), (3) Consider FHA loans (allow up to 57% DTI), (4) Find a less expensive home, (5) Increase down payment to reduce monthly payment, (6) Add a co-borrower with income.
Should I max out what I can afford?
NO - just because you CAN borrow the maximum doesn't mean you SHOULD. Leave buffer for: unexpected expenses, home repairs, property tax increases, lifestyle changes, savings goals. Many experts recommend staying at 25% of income instead of 28% for financial flexibility.
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