How Much House Can You Afford? Start With 28/36, Not the Pre-Approval
By the Stoia team · August 16, 2026 · 7 min read
On a $100,000 salary, the 28/36 rule points to a house around $338,000. A lender looking at the same salary may approve something closer to $480,000. Both numbers get called "what you can afford," but only one of them leaves room for retirement contributions, car repairs, and a life. This guide works the honest number from scratch, then shows exactly why the approval letter overshoots it.
The 28/36 rule in plain English
The rule sets two ceilings against your gross (pre-tax) monthly income. The front-end ceiling says housing costs should stay at or under 28% of it, and housing means the whole payment: principal, interest, property taxes, homeowners insurance, plus mortgage insurance and HOA dues where they apply. The back-end ceiling says housing plus every other debt payment (car loans, student loans, credit card minimums) should stay at or under 36%. Whichever ceiling is lower is the one that binds. It is a screening convention, not a law of nature, but it survives because it forces the two-sided look: what the house costs, and what the house costs next to everything else you owe.
From salary to price range: the full worked example
Take that $100,000 household with a $450 car payment and $250 in student loans. The arithmetic runs top to bottom:
| Step | Amount |
|---|---|
| Gross monthly income ($100,000 / 12) | $8,333 |
| Front-end ceiling (28%) | $2,333 |
| Back-end ceiling (36%) | $3,000 |
| Minus existing debt payments ($450 + $250) | −$700 |
| Back-end room left for housing | $2,300 |
| Housing budget (the lower ceiling wins) | $2,300 |
| Minus estimated taxes and insurance | −$500 |
| Left for principal and interest | $1,800 |
| Loan that payment supports (30-year, 7%) | ~$270,000 |
| Price with 20% down (~$68,000) | ~$338,000 |
Three notes on the assumptions. The $500 for taxes and insurance is an example figure: your county assessor and your insurer set the real one, and both are usually collected through an escrow account folded into the monthly payment. The rate matters enormously: at 6.5% instead of 7%, the same $1,800 supports roughly a $285,000 loan and a $356,000 price. And the down payment reshapes everything: with 10% down, mortgage insurance joins the payment and the supported price drops to around $283,000, though you only need about $28,000 in cash. The mortgage affordability calculator runs this whole chain on your actual income, debts, rate, and down payment, and the mortgage calculator prices any specific house you are eyeing.
The costs the payment quote never shows
The monthly payment is the floor of what a house costs, not the total. Maintenance is the big omission: a common planning range is 1–2% of the home's value per year, which on the $338,000 example is $3,400–$6,800 a year, or roughly $280–$560 a month flowing to roofs, water heaters, gutters, and the hundred small failures nobody itemizes in advance. Add one-time costs at purchase (closing costs of a few percent, moving, the furniture a bigger space quietly demands), utilities that run higher than apartment bills, and HOA dues where they apply. Taxes and insurance also drift upward over time, which means the escrow portion of your payment rises even when your rate is fixed. A realistic monthly number for the worked example is not $2,300; it is closer to $2,700 once a maintenance reserve is funded.
Why the lender will approve more than this
Pre-approval answers a different question than yours. The lender is computing the largest loan they can defend, and many programs allow total debt ratios well above 36%, sometimes into the mid-40s. They also underwrite your gross income: the approval does not know about your 401(k) contributions, health premiums, childcare, or the savings rate you are trying to protect. On the worked example, stretching from 36% to a mid-40s ratio adds roughly $750 a month of payment capacity, which is how the same salary gets an approval near $480,000. That $750 is not imaginary money; it is the money that was funding your goals. Check where you stand with the debt-to-income calculator before any lender does it for you, and treat the pre-approval as a ceiling for negotiations, never as a target.
A five-step way to set your own number
- Compute your debt-to-income ratio today. Existing payments eat the back-end ceiling dollar for dollar, so this number decides which ceiling binds.
- Set the housing budget at the lower of 28% of gross income or 36% minus current debt payments.
- Subtract real taxes and insurance, pulled from actual listings in your target area rather than a rule of thumb, and translate what remains into a price at today's rate.
- Fund maintenance from day one: 1–2% of the home's value per year, moved to savings monthly like any other bill.
- Stress-test the result. Would the budget survive six months on one income, an insurance renewal that jumps, or a special assessment? If not, the number is too high no matter what the letter says.
If the resulting price range disappoints, the levers are the same ones the math used: pay off a car loan to reclaim back-end room, save a larger down payment, widen the search area, or wait while both income and savings grow. Buying at the top of an approval fixes none of those; it just removes the slack you would have used to fix them later.
The house is one line, not the whole ledger
A home you can comfortably carry becomes the anchor of a growing balance sheet; one you cannot becomes the reason nothing else grows. Keeping the mortgage, the equity, and everything around them in one net worth view makes it obvious, month by month, which one you bought.