Enter your monthly income — we'll calculate your maximum home price, check your debt ratios (28/36 rule), and show you the full rent vs. buy picture.
The math behind the 28/36 rule — and why your real number may be different
Lenders use two ratios to determine how much they'll lend you. The front-end ratio (28%) caps your monthly housing payment — mortgage principal + interest + property taxes + homeowners insurance (PITI) — at 28% of your gross monthly income. The back-end ratio (36%) caps all monthly debt payments combined (housing + car loans + student loans + credit cards) at 36% of gross income.
Lenders use whichever limit is more restrictive. A $90,000/year salary ($7,500/month gross) allows a maximum housing payment of $2,100/month under the 28% rule — but if you have $600/month in car and student loan payments, the 36% rule caps your total debt at $2,700/month, leaving only $2,100 for housing anyway. The two limits align. Add more debt, and the back-end ratio tightens your housing budget further.
Conventional loans (Fannie Mae/Freddie Mac) typically use the 28/36 rule but can approve up to 45–50% back-end DTI with strong compensating factors (large reserves, excellent credit, significant down payment). FHA loans allow up to 31% front-end and 43% back-end DTI, making them more accessible for buyers with existing debt — at the cost of mandatory mortgage insurance premiums (MIP) that never cancel if your down payment was under 10%.
Your down payment affects affordability in three ways. First, a larger down payment reduces the loan amount, lowering your monthly P&I. Second, putting down less than 20% adds PMI (typically 0.5–1.5% of the loan annually) to your monthly payment. Third, the down payment competes with your other assets — $60,000 used as a down payment is $60,000 not invested in markets that have historically returned 8–10% annually.
On a $400,000 home: the difference between 10% down ($40K) and 20% down ($80K) is roughly $250/month in lower P&I plus the elimination of ~$200/month in PMI — a total of $450/month. Over 10 years, that's $54,000. But the extra $40,000 invested at 8% for 10 years grows to $86,000. The math favors a smaller down payment and investing the difference — but only if you actually invest it.
Every $100/month in recurring debt (car payment, student loan, credit card minimum) reduces your affordable home price by approximately $13,000–$16,000 at current rates. A $500/month car payment costs you roughly $75,000 in home-buying power. This is why paying down high-payment debt before applying for a mortgage — even if the interest rate is low — can significantly increase what you qualify for.
Lenders qualify you on gross income. But you pay your mortgage with net (take-home) income. A 28% gross payment equals 35–42% of take-home pay depending on your tax bracket and state — which can feel uncomfortably tight. Financial planners often recommend keeping total housing at or below 30–35% of net pay to leave adequate room for retirement contributions, an emergency fund (3–6 months of expenses), and unexpected homeownership costs.
With $80K gross and no other debt: max housing payment ~$1,867/month (28% of $6,667/mo). At 6.5% rate, 20% down, 1.2% property tax, this corresponds to roughly $305,000–$330,000. With $500/month in debt: max housing drops to ~$1,367/month → roughly $220,000–$245,000.
$400K home, 10% down, 6.5% rate, 1.2% property tax → PITI ≈ $2,900/month. The 28% rule requires ~$10,360/month gross ($124K/year) with no other debt. With $600/month in debt, you need ~$117K/year under the 36% back-end rule. Use the calculator above with your exact debts and down payment.
Yes — lenders include PMI in the PITI calculation used for the front-end DTI. If your PMI is $150/month, that $150 counts against your 28% housing budget. This is one reason why a 20% down payment substantially increases your affordable home price even beyond the lower loan amount.
Lenders qualify you on gross. But plan your personal budget on net (take-home). A safe rule: total housing payment ≤ 35% of take-home. If gross is $8,000/month and net is $6,000/month, the 28% lender limit is $2,240 — but 35% of net is $2,100. Plan to the more conservative of the two.
Affordability tells you what you can qualify for — not whether buying is better than renting financially. In many US markets right now, renting and investing the difference outperforms buying over 5–7 years. The full Rent vs. Buy calculator above (scroll up) runs a 30-year net worth comparison with your specific numbers, including appreciation, investment returns, and tax treatment.