Question 1

How much house can I afford on a $100K salary?

Accepted Answer

Using the 28% front-end DTI rule with a 30-year mortgage at 7%, 10% down, and typical taxes/insurance, you can afford roughly $350,000-$400,000. With lower debts and a larger down payment, you could stretch to $450K+. The comfortable range (25% DTI) is closer to $300K-$350K.

Question 2

What is the 28/36 rule for mortgages?

Accepted Answer

The 28/36 rule says your monthly housing costs (mortgage P&I + taxes + insurance + HOA) should not exceed 28% of your gross monthly income (front-end ratio), and your total debt payments (housing + car + student loans + credit cards) should not exceed 36% of gross monthly income (back-end ratio). Most lenders use these as guidelines, though some allow up to 43% or even 50% back-end for qualified borrowers.

Question 3

What is PMI and when do I have to pay it?

Accepted Answer

Private Mortgage Insurance (PMI) is required when your down payment is less than 20% of the home price on a conventional loan. It typically costs 0.5%-1.5% of the loan amount per year. You can request PMI removal once you reach 20% equity, and it automatically terminates at 22% equity. FHA loans have their own mortgage insurance (MIP) that works differently.

Question 4

Should I put 20% down to avoid PMI?

Accepted Answer

Not necessarily. While putting 20% down eliminates PMI and lowers your monthly payment, it also means tying up more cash in an illiquid asset. If you can invest the difference at 8-10% annual returns, keeping a smaller down payment and paying PMI for a few years could leave you wealthier overall. Run the numbers both ways.

Question 5

Does the calculator account for closing costs?

Accepted Answer

This calculator focuses on the home price you can afford based on your monthly budget. Closing costs (typically 2-5% of the home price) are a separate upfront expense. Make sure you have enough savings for both your down payment AND closing costs. A $400K home might need $8K-$20K in closing costs on top of your down payment.

Question 6

How does my credit score affect how much house I can afford?

Accepted Answer

Your credit score directly affects your mortgage rate. An excellent score (740+) gets the best rates, while a fair score (620-679) might add 0.75-1.5% to your rate. On a $300K loan, that difference in rate could cost $150-$300 more per month, reducing the home price you can comfortably afford by $30K-$60K.

Question 7

Is it better to buy a cheaper house or stretch my budget?

Accepted Answer

Buying below your maximum gives you a financial cushion for unexpected repairs, job changes, or life events. Many financial advisors suggest the 25% rule (not 28%) for more comfort. The stretch scenario (33% DTI) is risky, especially if you have variable income or expect large expenses in the near future.

Question 8

How much house can I afford with an FHA loan?

Accepted Answer

FHA loans allow a higher DTI ratio (up to 43% back-end, sometimes 50%) and require only 3.5% down with a 580+ credit score. However, they charge upfront mortgage insurance (1.75% of loan) plus annual MIP (0.55-1.05%) for the life of the loan. This lets you buy more house on paper, but your monthly costs will be higher.

How Much House Can I Afford?

Your Financial Profile

Your Affordability Range

Monthly Payment Breakdown

The 28/36 Rule Explained

Private Mortgage Insurance (PMI)

What is PMI?

How much?

How to remove it

Home Affordability by Income

Glen's Take on Housing Affordability

Hidden Costs of Homeownership

Maintenance & repairs

Utilities (if upgrading from apartment)

Landscaping / lawn care

Appliance replacement fund

Pest control

Homeowner association special assessments

Frequently Asked Questions