Frequently asked questions
What is the 28/36 rule for home affordability?
The 28/36 rule is a lending guideline. It says your total housing costs (mortgage, taxes, insurance) should not exceed 28% of gross monthly income (front-end ratio), and your total debt payments (housing plus all other debts) should not exceed 36% (back-end ratio). Lenders use the stricter of the two to qualify you.
Should I buy at the maximum I can afford?
Generally no. The 28/36 rule is a lender maximum, not a comfort target. Budget for maintenance (1–2% of home value annually), potential rate increases if refinancing later, and lifestyle expenses the formula ignores. Many financial advisors recommend spending no more than 3–4 times your annual income on a home.
How do existing debts affect how much house I can afford?
Every dollar of monthly debt reduces your affordable home price. The back-end ratio (36% limit) means $500/month in car and student loan payments can reduce your buying power by $70,000–$90,000 depending on the interest rate. Paying down debts before buying is one of the most effective ways to increase affordability.
Does a larger down payment help me afford more house?
Yes, but not as much as you might think. A larger down payment reduces the loan amount, which lowers the monthly mortgage payment and can eliminate PMI. But the 28/36 rule is based on income, not savings. The main benefit of a bigger down payment is lower monthly costs and less total interest paid.
What costs are NOT included in this calculation?
This estimates principal, interest, property tax, and insurance. It does not include closing costs (2–5% of price), moving expenses, HOA fees, maintenance and repairs (budget 1–2% annually), utilities, or furniture. Your true move-in cost is significantly higher than the down payment alone.
How accurate is this compared to what a lender will approve?
This uses the standard 28/36 qualifying ratios. Actual approval depends on your credit score, employment stability, assets, and the specific loan program. Some lenders approve up to 43% back-end DTI for strong borrowers. FHA loans allow up to 50% in some cases. Treat this as a planning baseline, not a guarantee.