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What is the 28/36 rule for mortgage affordability?

The 28/36 rule is a standard guideline used by lenders to determine how much you can borrow. The front-end ratio (28%) means your total housing payment (principal, interest, property taxes, and insurance) should not exceed 28% of your gross monthly income. The back-end ratio (36%) means your total monthly debt payments (housing + all other debts) should not exceed 36% of gross monthly income. This calculator uses both ratios to determine the maximum housing payment you can afford.

How is the maximum loan amount calculated?

The max loan amount is derived from the maximum monthly housing payment. Using the lower of the 28% income-based limit and the 36% DTI-based limit, the calculator subtracts estimated monthly property taxes and insurance to get the principal-and-interest (P&I) payment. It then uses the standard mortgage payment formula with your interest rate and loan term to calculate the loan amount that produces that P&I payment. Formula: Loan = P&I × [(1+r)^n - 1] / [r × (1+r)^n].

What is included in a monthly mortgage payment?

A full monthly mortgage payment (PITI) includes four components: Principal (the loan repayment), Interest (the cost of borrowing), Property Taxes (estimated at ~1.1% of home value annually divided by 12), and Homeowners Insurance (estimated at ~0.5% of home value annually divided by 12). Some payments also include PMI (Private Mortgage Insurance) if your down payment is less than 20%. This calculator estimates taxes and insurance as percentages of the home value.

How does the down payment affect affordability?

A larger down payment means you need a smaller loan, which reduces your monthly payment and total interest paid. It also helps you avoid PMI (required when down payment is under 20%). For example, on a $400,000 home, a 20% down payment ($80,000) means a $320,000 loan, while a 5% down payment ($20,000) means a $380,000 loan — resulting in significantly higher monthly payments and PMI costs.

What credit score do I need to buy a house?

Minimum credit scores vary by loan type: FHA loans require 500-580 (with 10% down at 500, 3.5% at 580), conventional loans typically require 620-640, VA loans have no official minimum (lenders usually want 620+), and USDA loans require 640. The best interest rates go to borrowers with 740+ scores. A 100-point difference in credit score can mean 0.5-1.5% higher interest rate, costing tens of thousands over the loan life.

How much should I save for a down payment?

Conventional wisdom says 20% down to avoid PMI, but many programs allow less. FHA requires 3.5%, conventional loans can go as low as 3%, and VA/USDA loans require 0% down. However, less than 20% means PMI ($50-$200+/month) and higher monthly payments. Also budget 2-5% of the home price for closing costs. On a $300,000 home, plan for at least $10,500 (3.5% down + 3% closing costs) but ideally $66,000+ (20% down + closing costs).

Does the loan term affect how much I can afford?

Yes, significantly. A 30-year term has lower monthly payments, allowing you to qualify for a larger loan amount. A 15-year term has higher monthly payments but saves substantial interest. For example, on a $300,000 loan at 6.5%: 30-year payment is ~$1,896/month (total interest ~$382,000), while 15-year payment is ~$2,613/month (total interest ~$170,000). The shorter term saves $212,000 in interest but requires $717 more per month.

What other costs should I budget for when buying a home?

Beyond the down payment and monthly mortgage, budget for: closing costs (2-5% of purchase price), home inspection ($300-$500), appraisal ($300-$500), moving costs ($500-$5,000), furniture and appliances, home maintenance (1-2% of home value annually), HOA fees (if applicable), utility setup fees, and potential repairs. First-year homeowners should have an emergency fund of 3-6 months of expenses including the new mortgage payment.

How accurate is this mortgage affordability calculator?

This calculator provides a good estimate based on standard lending guidelines. Actual affordability depends on additional factors: credit score (affects interest rate), property tax rates in your specific area, insurance costs, HOA fees, PMI, debt types, and lender-specific requirements. Some lenders allow DTI up to 43-50% with compensating factors. For a precise pre-approval amount, contact multiple lenders. Use this calculator as a planning tool to understand your approximate budget.

What is debt-to-income ratio (DTI)?

DTI ratio is the percentage of your gross monthly income that goes toward debt payments. Front-end DTI includes only housing costs (mortgage, taxes, insurance). Back-end DTI includes all monthly debts (housing, car loans, student loans, credit card minimums, child support). Lenders prefer back-end DTI under 36%, though some accept up to 43-50%. For example, if you earn $6,000/month and have $2,000 in total debt payments, your DTI is 33.3%. Lower DTI means better loan terms and easier approval.

Mortgage Affordability Calculator

Calculate how much home you can afford based on income, debts, and the 28/36 DTI rule.

IntermediateFinance CalculatorsFreev1.0.0Updated Jul 22, 2025

Mortgage Affordability Calculator

How much home can you afford? (28/36 DTI Rule)

Annual Gross Income

Monthly Debt Payments (car, student loans, credit cards)

Down Payment Amount

Mortgage Interest Rate %

Loan Term

28/36 DTI Rule

• 28% — Max housing payment as % of gross monthly income
• 36% — Max total debt (housing + other debts) as % of gross monthly income

100% Private — Runs in Your Browser

All calculations happen locally. Your financial data is never sent to any server.

How to Use the Mortgage Affordability Calculator

Enter your annual gross income — Your total pre-tax yearly salary or household income.
Enter monthly debts — Include car loans, student loans, credit card minimums, and other recurring debt.
Enter down payment — The amount you have saved for the home purchase.
Set interest rate and term — Current mortgage rate and desired loan duration (15, 20, or 30 years).
Review results — See your max home price, loan amount, monthly payment breakdown, and DTI ratios.

Features

28/36 DTI rule for standard lender qualification
Iterative loan amount calculation for accuracy
Estimated property tax (1.1% annual) and insurance (0.5% annual)
Detailed monthly payment breakdown (P&I, tax, insurance)
Front-end and back-end DTI ratio display
Three loan term options: 15, 20, and 30 years
Visual DTI health indicators (green/red)
Real-time calculation as you type
100% client-side — no data leaves your browser

Tips for Using Mortgage Affordability Calculator

Aim for a monthly mortgage payment no more than 28% of your gross monthly income.
Include property taxes, insurance, and HOA fees in your total housing cost estimate.
Improve your affordability by paying down existing debt using Debt Payoff Calculator.
Understand your total borrowing cost with Loan EMI Calculator.
Calculate your true disposable income with Salary After Tax Calculator.
Compare living costs in your target area with Cost of Living Calculator.

Frequently Asked Questions

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