With 30-year mortgage rates at approximately 6.8% and the median US home price at $407,000 in June 2026 according to the National Association of Realtors, affordability is at its worst level since the early 1980s by several measures. Yet millions of people are buying homes successfully. The question is not whether you can buy — it is whether you can do so without financial strain.
The rules lenders use (and their limits)
Mortgage lenders use two primary ratios to determine how much they will lend:
| Ratio | Rule | What it covers |
|---|---|---|
| Front-end DTI | Max 28% of gross monthly income | Mortgage P+I, property tax, insurance, HOA |
| Back-end DTI | Max 36-43% of gross monthly income | All housing costs plus all other debt payments |
These are lender maximums, not comfort targets. A 43% back-end DTI means you are sending nearly half your gross income to debt payments before food, utilities, transport, or savings. Most financial planners recommend keeping back-end DTI below 36% for genuine financial stability.
Full affordability worked example by income
| Gross annual income | Max housing (28%) | Affordable price (6.8%, 20% down, 30yr) | Required down (20%) |
|---|---|---|---|
| $60,000 | $1,400/mo | ~$175,000 | $35,000 |
| $80,000 | $1,867/mo | ~$240,000 | $48,000 |
| $100,000 | $2,333/mo | ~$300,000 | $60,000 |
| $120,000 | $2,800/mo | ~$365,000 | $73,000 |
| $150,000 | $3,500/mo | ~$460,000 | $92,000 |
| $200,000 | $4,667/mo | ~$615,000 | $123,000 |
Assumes 1.2% property tax, $150/mo insurance, no HOA, 30-year fixed at 6.8%.
The five inputs that actually determine affordability
1. Your real net income — not gross. The 28% rule uses gross income, but your mortgage is paid from net income. At $100,000 gross in a moderate-tax state, net take-home is roughly $72,000 ($6,000/month). A $2,333 mortgage payment is 39% of net — significantly tighter than the gross-based rule suggests.
2. Down payment size. Going from 10% to 20% down on a $400,000 home ($40,000 to $80,000) eliminates PMI ($150-$250/month) and reduces the loan by $40,000, saving $143/month in P+I at 6.8%.
3. Other debt payments. If you have $600/month in student loans and car payments, and lenders cap back-end DTI at 43% on a $100,000 income, your maximum housing payment drops from $2,333 to $1,733 — reducing your affordable price by roughly $65,000.
4. Credit score impact on rate. The difference between a 680 and 760 credit score is typically 0.5% on your mortgage rate. On a $350,000 loan, that is $113/month and $40,000 over the life of the loan.
5. Property tax by location. New Jersey averages 2.1% property tax; Hawaii averages 0.3%. On a $400,000 home, this is $8,400 vs $1,200 annually — a $600/month difference that dramatically changes your affordable price in different states.
The hidden costs buyers consistently underestimate
| Cost | Typical amount | Often forgotten? |
|---|---|---|
| Closing costs | 3-5% of purchase price ($12,000-$20,000 on $400K) | Yes — often not saved for |
| Home inspection | $400-$600 | No |
| Moving costs | $1,500-$5,000 | Partially |
| Immediate repairs | $3,000-$15,000 in year 1 | Yes |
| Annual maintenance | 1-2% of home value ($4,000-$8,000/yr) | Yes — consistently underestimated |
| Furnishing | $5,000-$20,000 | Yes |
A more honest affordability formula
Instead of gross-income rules, try this:
Step 1: Calculate your monthly net take-home pay (after tax, pension, and benefits). Use our Take-Home Pay Calculator.
Step 2: Subtract all existing monthly debt payments.
Step 3: Multiply the remainder by 35% — that is your maximum comfortable total housing cost.
Step 4: From that figure, subtract estimated property tax and insurance to find your affordable P+I payment.
Step 5: Run the result through our Mortgage Calculator to find the corresponding loan amount.
What $400,000 actually costs per month in different states
| State | Property tax rate | Monthly tax | P+I (6.8%, 20% down) | Total monthly |
|---|---|---|---|---|
| Texas | 1.80% | $600 | $2,085 | $2,835 |
| California | 0.76% | $253 | $2,085 | $2,488 |
| New York | 1.72% | $573 | $2,085 | $2,808 |
| Florida | 0.89% | $297 | $2,085 | $2,532 |
| Illinois | 2.08% | $693 | $2,085 | $2,928 |
All figures assume $150/month insurance. No HOA or PMI.
Run your exact numbers in our Mortgage Calculator — enter your target purchase price, down payment, local rate and property tax to get your real monthly payment immediately.