"How much house can I afford?" is one of the most important — and most stressful — questions you'll ask yourself when buying a home. The answer depends on your income, debts, down payment, credit score, and local market conditions. In this guide, we break it down clearly for every income level, with specific Colorado data to help you plan.
The Quick Answer: The 28/36 Rule
The mortgage industry uses the 28/36 rule as the standard guideline for affordability:
- 28% front-end ratio: Your total monthly housing costs (mortgage, property taxes, insurance, HOA, PMI) should not exceed 28% of your gross monthly income
- 36% back-end ratio: Your total monthly debt payments (housing + car loans + student loans + credit cards) should not exceed 36% of gross income
Some loan programs are more flexible. FHA loans can allow back-end ratios up to 50% with strong compensating factors. But just because you can be approved at a higher ratio doesn't mean you should — financial comfort matters as much as qualification.
How Much House You Can Afford at Every Income Level
Here's a comprehensive breakdown using 2026 rates and Colorado-specific data. Assumptions: 6% interest rate, 5% down, 0.51% property tax (Colorado average per the Colorado Department of Revenue), $150/month insurance, and no HOA.
$50,000 Annual Income
- Max monthly housing cost (28%): $1,167
- Estimated home price range: $170,000 – $200,000
- Monthly P&I on $190K loan: ~$1,139
- Best loan options: FHA, USDA (if rural), CHFA down payment assistance
At this income level, Colorado's CHFA programs can be a game-changer, providing up to 4% of the purchase price in down payment assistance.
$60,000 Annual Income
- Max monthly housing cost (28%): $1,400
- Estimated home price range: $220,000 – $260,000
- Monthly P&I on $240K loan: ~$1,439
- Best loan options: FHA, Conventional 3% down, CHFA assistance
$80,000 Annual Income
- Max monthly housing cost (28%): $1,867
- Estimated home price range: $300,000 – $370,000
- Monthly P&I on $330K loan: ~$1,978
- Best loan options: Conventional, FHA
This income level opens the door to many suburbs along the Front Range, including parts of Aurora, Thornton, and Colorado Springs.
$100,000 Annual Income
- Max monthly housing cost (28%): $2,333
- Estimated home price range: $380,000 – $450,000
- Monthly P&I on $410K loan: ~$2,458
- Best loan options: Conventional with 5-10% down
At $100K, you're within range of the Denver metro median home price. Strong buying position in today's market.
$120,000 Annual Income
- Max monthly housing cost (28%): $2,800
- Estimated home price range: $450,000 – $540,000
- Monthly P&I on $490K loan: ~$2,938
- Best loan options: Conventional with 10-20% down
$150,000 Annual Income
- Max monthly housing cost (28%): $3,500
- Estimated home price range: $570,000 – $680,000
- Monthly P&I on $620K loan: ~$3,717
- Best loan options: Conventional, approaching jumbo territory in some counties
$200,000+ Annual Income
- Max monthly housing cost (28%): $4,667+
- Estimated home price range: $750,000+
- Best loan options: Conventional, jumbo loans for amounts exceeding conforming limits
At this level, you'll likely encounter jumbo loan territory. See our jumbo loan guide for Colorado-specific details and requirements.
What Salary Do You Need for a $300,000 Mortgage?
A $300,000 mortgage at 6% interest has a monthly principal and interest payment of approximately $1,799. Adding property taxes (~$128/month in Colorado), insurance (~$150/month), and potential PMI (~$150/month), your total housing payment is roughly $2,227/month.
Using the 28% rule: $2,227 ÷ 0.28 = $7,953 gross monthly income, or approximately $95,400 annually. Without PMI (if you put 20% down), the required income drops to about $82,400.
What Salary Do You Need for a $400,000 Mortgage?
At 6% interest, the monthly P&I on $400,000 is approximately $2,398. Total housing costs with taxes, insurance, and PMI come to roughly $2,926/month.
Required income: $2,926 ÷ 0.28 = $10,450/month, or approximately $125,400 annually with PMI. Without PMI: approximately $109,700 annually.
What Salary Do You Need for a $500,000 Mortgage?
The monthly P&I on $500,000 at 6% is approximately $2,998. With taxes, insurance, and PMI, the total comes to roughly $3,626/month.
Required income: $3,626 ÷ 0.28 = $12,950/month, or approximately $155,400 annually. Without PMI: approximately $135,600 annually.
Factors That Change Your Affordability
1. Existing Debt
Your other monthly obligations — car payments, student loans, credit cards, personal loans — directly reduce how much mortgage you can qualify for. Every $500/month in existing debt can reduce your purchasing power by $75,000-$85,000.
2. Credit Score
A higher credit score earns a lower interest rate, which dramatically changes affordability. The difference between a 6.5% and a 5.75% rate on a $400,000 loan is $180/month — or $64,800 over the life of the loan.
3. Down Payment
A larger down payment reduces the loan amount and eliminates PMI at 20%+. Putting 20% down instead of 5% on a $400,000 home saves roughly $250/month in lower mortgage payment and eliminated PMI.
4. Property Taxes and HOA
Colorado has low property taxes on average (0.51%), but some neighborhoods — especially those with HOAs — can significantly increase monthly costs. A $400/month HOA fee effectively reduces your purchasing power by $60,000-$70,000.
5. Interest Rates
At current rates near 6%, a 1% drop in rate (to 5%) increases your purchasing power by roughly 10-12%. Rate movement directly impacts what you can afford, which is why timing and rate-shopping matter. According to Freddie Mac's weekly rate survey, rates have been gradually declining through early 2026.
Colorado-Specific Affordability Tips
- CHFA down payment assistance: Up to 4% of the purchase price as a grant or second mortgage — see CHFA eligibility
- Low property taxes: Colorado's effective tax rate of 0.51% is less than half the national average, giving Colorado buyers more purchasing power
- Metro District taxes: Some newer developments have metro district taxes that can add 0.5-1.5% to the effective tax rate — always check before buying
- Mountain property considerations: Homes in resort communities like Vail and Telluride may require jumbo financing and higher down payments
Ready to See Your Exact Number?
Every buyer's situation is unique. Income, debts, credit, and local market conditions all interact to determine what you can afford. The best way to get your real number is to get pre-approved.
Get pre-approved with Cedar Home Loans — it's free, takes about 15 minutes, and gives you a concrete maximum purchase price. Or try our mortgage calculator for a quick estimate. Have questions? Call us at (970) 368-6135.
