How much house can I afford in the US?
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By Editorial team
On a $400,000 US home with 10% down at 6.50% with PMI and modest property taxes, total modeled PITI lands at $2,965/month. Drop the price to $340,000 at the same rate and down payment percentage, and the PITI falls to $2,524/month, a $441/month gap. Over 30 years, the smaller home also costs $68,874 less in total interest. This article is for US buyers trying to decide which sticker-price tier fits a real monthly budget, with taxes, insurance, and PMI included.
The scenario modeled
Both tabs use the same rate, the same down-payment percentage (10%), the same 30-year term, and the same PMI rate (0.55% of original balance). The only variable is the home price. Property taxes scale proportionally (1.2% of home value) and insurance scales roughly with replacement cost. This is a deliberate "same buyer, two price points" comparison so the payment gap is entirely attributable to the price tier.
| Input | $400k stretch | $340k comfort |
|---|---|---|
| Home price | $400,000 | $340,000 |
| Down payment (10%) | $40,000 | $34,000 |
| Loan amount | $360,000 | $306,000 |
| Rate | 6.50% fixed | 6.50% fixed |
| PMI | 0.55% annual | 0.55% annual |
| Property taxes | $4,800/year | $4,080/year |
| Home insurance | $125/month | $110/month |
| Term | 30 years | 30 years |
The findings
The $400k payment of $2,965/month leaves a borrower earning $120,000 gross annually at roughly 30% of gross income going to housing. The $340k payment of $2,524/month drops that ratio to 25%, which is the comfort zone most household-finance frameworks recommend. On take-home pay (after federal and state tax withholding, assume roughly $7,500/month net), the $400k home claims 40% of take-home while the $340k home claims 34%. The 6-point difference is what most buyers feel as "breathing room."
Need to see PITI for a different down-payment scenario? Our PITI + HOA guide breaks out each component on a $450k home with 10% down.
| $400k stretch | $340k comfort | Difference | |
|---|---|---|---|
| Monthly P&I + PMI | $2,605 | $2,214 | $391 less on $340k |
| Monthly taxes + insurance | $525 | $450 | $75 less on $340k |
| Total PITI (month 1) | $2,965 | $2,524 | $441/mo less on $340k |
| Total interest over 30 years | $459,160 | $390,286 | $68,874 less on $340k |
| Cash to close (10% down) | $40,000 | $34,000 | $6,000 less |
US context
The Consumer Financial Protection Bureau's qualified-mortgage rule caps total debt at roughly 43% of gross income for most conventional loans, but that is a regulatory limit, not a recommendation. Freddie Mac research shows borrowers whose total housing cost exceeds 30% of gross income are materially more likely to fall behind on payments during income disruptions. Keeping PITI at or under 25% of gross (equivalently, roughly 30% of take-home) is the standard "house poor" threshold.
Source: Consumer Financial Protection Bureau, "What is a qualified mortgage?" accessed April 2026. URL: https://www.consumerfinance.gov/ask-cfpb/what-is-a-qualified-mortgage-en-1789/
When this scenario applies, and when it does not
This applies when: you are a first-time buyer comparing price tiers, have stable W-2 income, and want a monthly-cost-first view of affordability rather than a pre-approval-amount-first view. Pre-approval amounts typically overestimate comfortable spending because they use lender ceilings, not your actual budget.
It does not apply cleanly when:
- You have variable or self-employed income. Lenders require additional reserves and your personal budget should target a lower percentage of gross income (20-22% rather than 25%) to absorb income volatility.
- You are buying in a high-tax jurisdiction. Property taxes in parts of New Jersey, Illinois, Texas, and New Hampshire can run 2%+ of home value annually, which pushes the PITI meaningfully higher than the 1.2% modeled here. Re-run the scenario with your county's effective rate.
- You plan to pay the loan off within 5 years. If the house is short-term, the PMI and PITI math matter less than the closing costs, transaction costs, and the risk that prices do not appreciate enough to cover them at sale. See our refinance break-even article for the short-horizon framework.
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Frequently asked questions
- What percentage of income should my mortgage payment be?
- US lenders typically cap total monthly housing cost (PITI plus HOA) at 28% of gross monthly income for a qualified conventional loan, and total debt at 43-50% of gross income. Those are underwriting ceilings, not comfort targets. Most household budgeting frameworks recommend keeping housing under 25% of net (take-home) income, which leaves room for saving, utilities, and unexpected expenses.
- Why does a $60k price difference produce $441/month in payment difference?
- Most of the $441/month gap comes from the loan size itself: P&I is higher on the bigger loan, PMI is higher because it is a percentage of a larger balance, property taxes scale with home value, and home insurance also scales. In our modeled scenario, about $366 of the gap is P&I and PMI, with the remaining $75 coming from taxes and insurance.
- Should I include taxes and insurance when deciding what I can afford?
- Always. On the modeled $400k home, taxes and insurance add $525/month on top of P&I plus PMI, which is the difference between a $2,440/month mortgage and a $2,965/month housing cost. Lenders will qualify you on the full PITI, not just P&I, and your budget has to carry the full amount.
- How do I know what rate to plug in?
- Use your lender's rate sheet for your credit score and loan size, not a headline national average. If you have not applied yet, Freddie Mac's Primary Mortgage Market Survey (PMMS) publishes a weekly national average that is a reasonable starting point, but your actual quote may be 0.25% higher or lower depending on your credit profile, down payment, and location.
- What if my down payment is 20% instead of 10%?
- Dropping PMI by moving to 20% down saves about $165/month on the modeled $400k home, and reduces the loan size. The trade-off is tying up an extra $40k of cash. On rates above 6%, the PMI premium often costs more over three-to-five years than the opportunity cost of the additional down payment, but that flips for shorter holding periods or higher-yield alternative uses of the cash.