How Much House Can I Afford?
Use the 28/36 rule to find your max purchase price based on income, debts, and down payment.
The 28/36 Rule Explained
The 28/36 rule is the standard guideline lenders use to evaluate how much mortgage you can handle. The front-end ratio (28%) says your total housing costs -- including principal, interest, property taxes, and insurance (PITI) -- should not exceed 28% of your gross monthly income. The back-end ratio (36%) says your total monthly debts, including housing costs plus car loans, student loans, credit cards, and other obligations, should stay under 36%.
Lenders look at both ratios and use the more restrictive one. If you have significant existing debts, the 36% back-end ratio becomes the binding constraint, even if your income alone would support a larger housing payment under the 28% rule. This is why paying down debt before buying a home can significantly increase your purchasing power.
Keep in mind that what you qualify for and what you should spend are different. The 28/36 rule provides a ceiling, not a target. Many financial advisors recommend keeping housing costs at 25% of gross income or less. Our conservative estimate (80% of max) gives you breathing room for emergencies, home maintenance, and other financial goals like retirement savings.