How it works
Lenders judge what you can borrow with two debt-to-income ratios, both measured against your gross (pre-tax) monthly income:
Housing ratio = monthly housing payment ÷ gross monthly income
Total ratio = (housing payment + other debt payments) ÷ gross monthly income
The housing payment includes principal and interest, property tax, home insurance, and PMI and HOA fees when they apply. The calculator finds the highest home price whose full monthly payment keeps both ratios under your limits, and tells you which limit stops you.
Worked example
You earn $100,000 a year ($8,333 a month), pay $600 a month on a car loan and have $40,000 for a down payment.
Under the 28/36 guideline, housing can take up to $2,333 a month (28%), and housing plus the car loan up to $3,000 (36%), which leaves $2,400 for housing. The lower of the two, $2,333, is your ceiling.
At 6.9% over 30 years, with 1.1% property tax, $1,800 a year of insurance and PMI at 0.5%, that ceiling buys a home of about $311,000: a $271,000 loan and a $2,333 monthly payment.
With FHA-style limits (31/43) the price rises to $342,600. If your other debts were $1,000 a month instead, the 36% limit would bite first and the price would fall to $268,900. A rate one point lower, 5.9%, would lift it to $335,400.
Things to know
- Lenders' limits vary. 28/36 is a common guideline for conventional loans, and the CFPB suggests keeping total debt at 36% or less. FHA's standard ratios are 31% and 43%, and some lenders go higher with strong credit or large savings.
- Approved isn't the same as comfortable. Ratios use gross income, but you pay the bills from take-home pay. Check the payment against your real budget with the 50/30/20 budget calculator.
- Keep cash back. Closing costs, moving and repairs come on top of the down payment. Don't spend your emergency fund on the house.
- Taxes and insurance vary a lot. Property tax rates differ widely by state and county, and insurance costs more in some regions. Use real quotes when you have a home in mind.
Questions people ask
What is the 28/36 rule?
It's a rule of thumb: spend no more than 28% of your gross monthly income on housing, and no more than 36% on all debt payments together, housing included. On $100,000 a year that's $2,333 and $3,000 a month.
Which debts count?
Regular payments on car loans, student loans, personal loans and credit cards (the minimum payment), plus obligations like child support. Everyday bills such as groceries, utilities and phone plans don't count. Leave out your current rent, since the new home replaces it.
How can I afford more house?
Pay down other debts (when the total limit is what stops you), save a bigger down payment, shop for a lower rate, or look at areas with lower property taxes. The table above shows how much each change moves your budget.
Does a bigger down payment always help?
Yes, though a little less than dollar for dollar, because a pricier home also carries more property tax and insurance. Reaching 20% down removes PMI on a conventional loan, which frees more of your monthly budget for the loan itself.
Sources
- Consumer Financial Protection Bureau: what is a debt-to-income ratio?
- U.S. Department of Housing and Urban Development: FHA qualifying ratios (31% housing, 43% total)
- Consumer Financial Protection Bureau: what is private mortgage insurance?
- Freddie Mac: Primary Mortgage Market Survey (weekly average rates)
Reviewed September 26, 2026 by The Dollars World team. How we build and check our calculators · Our data and formulas. This is general information, not financial advice.