Professional User Guide
1. Understanding the 28/36 Rule
Lenders typically prefer that your housing costs (mortgage, insurance, taxes) don't exceed 28% of your gross income, and your total debt doesn't exceed 36%. This calculator uses this industry standard to estimate your "safe" borrowing limit.
2. The Impact of Monthly Debts
Your existing monthly obligations, such as car loans, student loans, and credit card minimums, directly reduce the amount a bank will lend you for a home. Reducing these debts before applying can significantly increase your affordability.
How to Use This Calculator
1. Enter Your Annual Income
Use your gross household income before taxes — the number lenders look at. If you buy with a partner, add both incomes together. Include steady bonuses or side income only if you can document it.
2. Add Your Monthly Debts
Total your required minimum payments: car loans, student loans, credit card minimums, and personal loans. Do not include rent, utilities, or groceries — lenders count only debts that appear on your credit report.
3. Set Your Down Payment
Enter the cash you plan to put down. This amount is added directly to the loan the calculator estimates, so every extra dollar of down payment raises your maximum price dollar for dollar.
4. Choose an Interest Rate
Enter a rate close to the quotes you are seeing for a 30-year fixed loan. The results update instantly, so try a few rates — even a half-point change can move your maximum price by tens of thousands of dollars.
Worked Example
Say your household earns $100,000 a year ($8,333 per month), you pay $500 a month in debts, and you have $20,000 saved for a down payment. At an example 6.5% rate on a 30-year fixed loan, here is how the 28/36 rule plays out:
- 28% housing limit: $8,333 × 0.28 = about $2,333 per month for the total housing payment.
- 36% total debt limit: $8,333 × 0.36 = $3,000, minus $500 in debts = $2,500. The lower of the two limits wins, so $2,333 is the cap.
- Loan size: a $2,333 payment at an example 6.5% over 30 years supports a loan of roughly $369,000.
- Maximum price: $369,000 + $20,000 down = about $389,000.
These rates and figures are illustrative — plug in your own numbers above to get your estimate. Earning around $100k? See our full breakdown in How Much House Can I Afford on a $100k Salary.
How to Read Your Results
Your Number Is a Ceiling, Not a Target
The maximum price is what the 28/36 rule allows — the top of the range, not a recommendation. Buying 10-20% below it leaves room for maintenance, rising insurance premiums, and the unexpected. A house you can barely afford on day one gets harder to afford when the roof leaks.
Remember Taxes, Insurance, and HOA
The 28% limit is meant to cover your entire housing payment: principal, interest, property taxes, and homeowners insurance (PITI). Taxes and insurance vary widely by state and even by neighborhood, so budget for them before committing to a price. Add HOA dues if the property has them.
Don't Forget Closing and Moving Costs
Closing costs typically add a few percent of the purchase price on top of your down payment, and moving is not free either. If your down payment savings would be wiped out at closing, consider a lower price point or a longer savings runway.
Common Mistakes to Avoid
Three errors show up constantly: using take-home pay instead of gross income (understates what lenders see), leaving out debts like student loans in deferment (overstates it), and shopping at your absolute maximum. Also avoid opening new credit — a car loan taken out before closing can shrink your approval.
Frequently Asked Questions
What is the 28/36 rule?
The 28/36 rule is a guide used by lenders: housing expenses should not exceed 28% of gross monthly income, and total debt payments should not exceed 36%.
How does down payment affect affordability?
A larger down payment reduces the loan amount needed, which lowers your monthly payments and allows you to afford a higher-priced home for the same monthly cost.
Does this calculator include property taxes and insurance?
The 28% housing limit is meant to cover your full housing payment — principal, interest, taxes, and insurance (PITI). The calculator sizes the loan from that limit, so leave room in your budget for taxes, insurance, and any HOA dues, which vary widely by location.
What loan term does this calculator use?
It assumes a 30-year fixed mortgage, the most common U.S. loan term. A 15-year loan carries a higher monthly payment, which lowers the maximum price you can afford but cuts total interest sharply. Compare terms with our 15 vs 30 year mortgage guide.
Can I get approved with a DTI above 36%?
Often yes. Many lenders approve conventional loans with DTI ratios in the mid-40s for borrowers with strong credit, and FHA loans can go higher. The 28/36 rule marks the comfort zone — borrowing above it leaves less room for repairs, savings, and emergencies.
Should I spend the full amount the calculator shows?
Treat the result as a ceiling, not a target. Buying below your maximum keeps your monthly budget flexible for maintenance, rising insurance costs, and life changes. Many buyers aim 10-20% below the maximum the 28/36 rule allows.