Calculate how much house you can afford based on your income, debts, and down payment using the industry-standard 28/36 rule. Get instant results with detailed affordability breakdown.
| Home Price | Down Payment (20%) | Monthly Payment | Required Income |
|---|
| Down Payment | Loan Amount | Monthly P&I | Total Interest | PMI Required |
|---|
Your total housing costs (PITI) should not exceed 28% of your gross monthly income. This ensures you have enough left for other expenses.
Your total debt payments (including housing) should not exceed 36% of your gross monthly income. Lenders use this to assess loan risk.
A larger down payment reduces your loan amount, monthly payment, and may eliminate PMI. Aim for 20% if possible to maximize savings.
The 28/36 rule is a guideline used by lenders to determine how much house you can afford. It consists of two ratios:
If you earn $75,000 annually ($6,250/month), your maximum housing payment should be $1,750 (28%), and your total debt payments should not exceed $2,250 (36%).
DTI ratio is the percentage of your gross monthly income that goes toward debt payments. It includes:
If your calculated affordability is lower than desired, consider these strategies:
If you're buying your first home, keep these tips in mind:
While the 28/36 rule is a good guideline, also consider: your job stability, future income prospects, planned family changes, local market conditions, and personal financial goals. Just because you qualify for a certain amount doesn't mean you should borrow it.
Lenders use several rules of thumb for mortgage affordability. The most common is the 28/36 rule: housing costs should not exceed 28% of gross monthly income, and total debt-to-income should not exceed 36%. These calculations assume a 20% down payment and 7.0% mortgage rate:
| Annual Income | Max Monthly Payment (28%) | Max Affordable Home (28/36) | 3× Rule Home Price |
|---|---|---|---|
| $50,000 | $1,167/mo | ~$155,000 | $150,000 |
| $70,000 | $1,633/mo | ~$220,000 | $210,000 |
| $90,000 | $2,100/mo | ~$282,000 | $270,000 |
| $120,000 | $2,800/mo | ~$376,000 | $360,000 |
| $150,000 | $3,500/mo | ~$470,000 | $450,000 |
| $200,000 | $4,667/mo | ~$628,000 | $600,000 |
The 28/36 rule is a standard guideline used by lenders to determine how much house you can afford. The "28" means your housing costs (PITI) should not exceed 28% of your gross monthly income. The "36" means your total debt payments (including housing) should not exceed 36% of your gross monthly income. This helps ensure you can comfortably afford your mortgage while meeting other financial obligations.
As a general rule, you can afford a house that costs 2.5 to 3 times your annual gross income. For example, if you earn $75,000 per year, you could afford a home in the $187,500 to $225,000 range. However, the exact amount depends on your debt-to-income ratio, down payment size, interest rate, property taxes, and other monthly debts. Use this calculator to get a personalized estimate based on your specific financial situation.
DTI (Debt-to-Income) ratio includes all your monthly debt obligations divided by your gross monthly income. This includes: your future mortgage payment (principal, interest, taxes, insurance), credit card minimum payments, auto loan payments, student loan payments, personal loan payments, child support, alimony, and any other recurring debt obligations. It does not include utilities, groceries, insurance (other than home insurance), or other living expenses.
PITI stands for Principal, Interest, Taxes, and Insurance - the four components of your monthly housing payment. Principal is the amount borrowed, Interest is the cost of borrowing, Taxes are property taxes, and Insurance includes homeowners insurance and PMI (if applicable). Lenders use PITI to calculate your housing ratio and determine affordability.
A larger down payment increases affordability in several ways: it reduces the loan amount (lowering monthly payments), may eliminate PMI (private mortgage insurance) if you put down 20% or more, demonstrates financial stability to lenders, and may qualify you for better interest rates. Even increasing from 5% to 10% down can significantly improve your buying power and reduce long-term costs.
Yes, it's possible but more challenging. Some lenders allow DTI ratios up to 43% for conventional loans, and FHA loans may go up to 50% in certain circumstances. However, higher DTI ratios typically require compensating factors such as excellent credit scores, substantial cash reserves, or significant down payments. Keep in mind that just because you can qualify doesn't mean it's financially wise - higher DTI ratios leave less room for unexpected expenses.
Yes, if you have a consistent history. Lenders typically require a 2-year history of bonus or commission income to include it in your qualifying income. They'll average your bonus/commission earnings over the past 2 years. If your income is increasing, they'll use the higher amount. If it's decreasing, they may use a more conservative figure or exclude it entirely. Self-employment income also requires 2 years of tax returns for verification.
Closing costs typically range from 2% to 5% of the home's purchase price. On a $300,000 home, expect $6,000 to $15,000 in closing costs. These include loan origination fees, appraisal, title insurance, attorney fees, recording fees, and prepaid items (property taxes, homeowners insurance). Some costs are negotiable, and you may be able to ask the seller to contribute or shop around for better rates on services like title insurance.