How Much House Can I Afford? (2025 Guide)
A complete guide to calculating home affordability based on your income, debt, and down payment, with real examples and city-by-city data.
The 28/36 Rule
The most widely used affordability guideline is the 28/36 rule: spend no more than 28% of your gross monthly income on housing costs (mortgage principal, interest, taxes, and insurance — PITI), and no more than 36% of gross income on total debt payments (housing + car loans + student loans + credit cards). Lenders use this as a baseline, though some allow up to 43% total debt-to-income ratio.
What Income Do You Need?
At current mortgage rates (approximately 6.75% for a 30-year fixed), here's the income required to comfortably afford homes at different price points:
• $250,000 home (20% down, $200,000 loan): ~$1,330/month PITI → requires ~$57,000/year income
• $350,000 home (20% down, $280,000 loan): ~$1,860/month PITI → requires ~$80,000/year income
• $450,000 home (20% down, $360,000 loan): ~$2,390/month PITI → requires ~$102,000/year income
• $600,000 home (20% down, $480,000 loan): ~$3,190/month PITI → requires ~$137,000/year income
The Down Payment Factor
Your down payment significantly affects affordability. With less than 20% down, you'll pay Private Mortgage Insurance (PMI), typically 0.5–1.5% of the loan amount annually. On a $300,000 loan, PMI adds $125–$375/month to your payment. FHA loans allow 3.5% down with a credit score of 580+, but require mortgage insurance for the life of the loan.
Affordability by City
The income required to afford a median-priced home varies dramatically by city. In Pittsburgh, PA, a median home ($225,000) requires about $55,000/year income. In San Francisco, CA, a median home ($1.1M) requires about $270,000/year income — more than 5x the national median household income of $74,580.
Hidden Costs of Homeownership
Beyond the mortgage payment, budget for: property taxes (0.5–2.5% of home value annually); homeowner's insurance ($1,200–$3,000/year); HOA fees if applicable ($200–$800/month in many communities); maintenance and repairs (budget 1–2% of home value annually); and utilities (often higher than renting due to larger space).