Quick affordability rules
- 28% rule: housing costs ≤ 28% of gross monthly income.
- 36% rule: total debt payments ≤ 36% of gross income.
- 3x rule: home price ≈ 3× your annual household income.
- Hidden costs add 30–50% on top of the mortgage payment.
The 28/36 rule explained
The 28/36 rule is the gold standard for affordability. Spend no more than 28% of gross monthly income on housing (mortgage + taxes + insurance + HOA), and no more than 36% on total debt (housing + car + student loans + credit cards).
Example: $75,000/year salary
Assumes 6.5% rate, 30-year fixed, average taxes and insurance.
The hidden costs of owning a home
Many first-time buyers are surprised that the mortgage is just the start. Your true monthly cost also includes property taxes, insurance, PMI (if you put down less than 20%), HOA fees, maintenance, and utilities.
True cost of a $300,000 home
That's 48% more than the mortgage payment alone.
How much down payment do you need?
- 20% down — no PMI, lower payments, best rates. On a $300k home: $60,000.
- 10% down — PMI required but more accessible: $30,000.
- 3–5% down — conventional or FHA loans: $9,000–$15,000.
- 0% down — VA loans (military) or USDA loans (rural areas).
Plan your down payment timeline with our savings goal calculator, and remember to budget an extra 3–6% for closing costs.
Steps to buy your first home
- Check your credit score — 740+ gets the best rates; 620+ is the usual minimum.
- Calculate affordability with the mortgage calculator.
- Save for the down payment plus 3–6% in closing costs.
- Get pre-approved and shop at least 3 lenders to compare rates.
- Stay below your max, get an inspection, then close and move in.
Rent vs buy
Buying is not automatically better. It usually makes sense if you will stay 5+ years, have stable income, and can cover the all-in costs. Otherwise renting and investing the difference can come out ahead.
Calculate your home budget
Use our free tools to plan your purchase with confidence.
Frequently Asked Questions
How much house can I afford on a $75,000 salary?
Using the 28% rule, about $1,750/month for housing. At a 6.5% rate with 20% down, that is roughly a $280,000–$320,000 home, depending on property taxes and insurance in your area.
What is the 28/36 rule for mortgages?
Spend no more than 28% of gross monthly income on housing costs, and no more than 36% on total debt payments (housing plus car, student loans and credit cards).
How much should I put down on a house?
20% is ideal because it avoids PMI (which costs 0.5–1% of the loan per year). But many first-time buyers put down 3–5%, and FHA loans allow just 3.5%. Model your scenario with the mortgage calculator.