How Much House Can You Actually Afford? The Real Numbers Behind the 28% Rule

Lenders will approve you for a loan amount that maximizes their interest income. The question "how much house can I afford?" and "how much will a lender give me?" have different answers — and confusing the two is how people become house-poor. Here's the complete framework for calculating your actual comfortable housing budget.

The 28/36 rule — and why it's not enough

The classic guideline: spend no more than 28% of gross income on housing (PITI — principal, interest, taxes, insurance) and no more than 36% on all debt payments combined. This is a starting point, not a complete answer. Two problems:

1. It uses gross income. Your actual take-home pay determines cash flow. High earners in high-tax states (CA, NY) might pay 40%+ effective tax rates — meaning 28% of gross is actually 47% of take-home.
2. It excludes ongoing ownership costs: maintenance, HOA, utilities differential, and for <20% down — PMI.

Full housing cost calculation: beyond PITI

That $500,000 home isn't a $2,864/mo payment. It's a $4,400–$5,600/month housing cost. To keep that at 28% of gross income, you'd need to earn $190,000–$240,000/year.

What different incomes actually buy

Assumes 6.8% 30yr rate, 20% down, 1.5% property tax, 0.75% insurance, 1.25% annual maintenance reserve. Your rate, tax, and PMI will vary.

Three different answers, and only one is yours

"Affordable" means three separate things and they rarely agree:

• What a lender will approve — a function of income multiples and stress tests.
• What the monthly payment allows — the traditional ratio rules.
• What leaves your life intact — the only one that matters, and the only one nobody calculates for you.

Lenders assess your ability to repay, not your ability to also save, travel, change jobs or absorb a broken boiler. Borrowing the maximum offered is how people become house-poor with a perfectly performing mortgage.

The rules of thumb, and where they break

The common guidance is that housing should take no more than 28% of gross income, and total debt no more than 36%. They are a reasonable starting filter and they fail in two specific ways.

They use gross income, so two people with identical salaries and very different tax or childcare positions get the same answer. And they assume housing cost equals the mortgage payment, when the real figure includes property tax, insurance, service charges and maintenance — which routinely add 30–50% on top of principal and interest.

Run it on take-home pay instead

Start from what actually lands in your account, subtract everything you are already committed to, and see what remains. Then subtract again for the costs that arrive with ownership and not with renting: maintenance at roughly 1% of the property value a year, buildings insurance, and whatever the local property tax is.

Whatever is left after all of that is the genuine monthly capacity. It is almost always a smaller number than the lender's.

The deposit is not the constraint people assume

In several markets the binding limit is not savings at all. Ireland caps most borrowing at four times gross household income, which for a Dublin purchase bites well before the 10% deposit does. The UK stress-tests affordability at a rate above the one you are offered. Switzerland requires a 20% deposit of which at least half must be genuine cash, and then tests affordability at an imputed rate near 5%.

Knowing which constraint binds in your market tells you whether to save harder or earn more — and they are very different plans.

Two questions worth more than the calculation

1. How long will you stay? Transaction costs are heavy on both ends. Under about five years, the sums frequently favour renting regardless of what you can afford.
2. What happens if one income stops? Model the payment against a single salary, or against a period of reduced income. A mortgage comfortable on two incomes and impossible on one is a risk, not a budget.

Frequently asked questions

How much house can I actually afford?
Less than a lender will approve, usually. Lenders assess your ability to repay, not your ability to also save, travel, change jobs or absorb a broken boiler. Start from take-home pay, subtract existing commitments, then subtract again for maintenance at roughly 1% of value a year, insurance and property tax.

What is the 28/36 rule?
Housing costs no more than 28% of gross income and total debt no more than 36%. A reasonable first filter that fails in two ways: it uses gross income, ignoring very different tax and childcare positions, and it treats housing cost as the mortgage payment when the real figure is 30-50% higher.

Is the deposit the main constraint?
Often not. Ireland caps most borrowing at four times gross household income, which bites well before the 10% deposit does. The UK stress-tests affordability above the offered rate. Switzerland requires 20% down with at least half in genuine cash. Knowing which constraint binds tells you whether to save harder or earn more.

What should I check before buying?
How long you will stay — under about five years the transaction costs usually favour renting — and what happens if one income stops. A mortgage comfortable on two incomes and impossible on one is a risk, not a budget.