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How much house can I afford on $40,000 a year and $20,000 down?

$104,379

On $40,000 a year, the 28/36 rule supports about $933 a month of housing cost — roughly a $104,379 house with $20,000 down at 6.5% over 30 years.

How it is worked out

Lenders cap two ratios: housing alone at about 28% of gross income, and housing plus every other debt at about 36%. The lower of the two binds. The 28% housing limit binds here. That has a consequence worth knowing: other debt changes nothing at all until it passes $267 a month — the gap between the two limits, which is 8% of gross monthly income.

min($3,333 × 28%, $3,333 × 36% − $0) = $933 housing; less $400 tax and insurance leaves $533 for principal and interest, which supports a $84,379 loan

This is what a lender would approve, which is not the same as what is comfortable to live on — the ratios use gross income, so they are drawn on money you never receive. Tax and insurance are assumed at $400 a month and vary enormously by location; HOA fees, PMI below 20% down, and maintenance are all on top.

Open the full house affordability calculator to use your own figures.

Similar questions

Questions

How much house can I afford on $40,000 a year and $20,000 down?
On $40,000 a year, the 28/36 rule supports about $933 a month of housing cost — roughly a $104,379 house with $20,000 down at 6.5% over 30 years. min($3,333 × 28%, $3,333 × 36% − $0) = $933 housing; less $400 tax and insurance leaves $533 for principal and interest, which supports a $84,379 loan.
How is this worked out?
Lenders cap two ratios: housing alone at about 28% of gross income, and housing plus every other debt at about 36%. The lower of the two binds. The 28% housing limit binds here. That has a consequence worth knowing: other debt changes nothing at all until it passes $267 a month — the gap between the two limits, which is 8% of gross monthly income.
Can I use my own figures?
Yes — the house affordability calculator takes any values and shows the full result.