What is the 28/36 rule for home affordability?

The 28/36 rule is a lending guideline that limits housing costs to 28% of gross monthly income and total debt payments to 36% of gross monthly income. For example, a household earning $8,000/month gross should keep housing costs below $2,240 and total debts below $2,880. The Consumer Financial Protection Bureau (CFPB) references these thresholds as standard benchmarks for mortgage qualification. FHA and VA loans use slightly different ratios -- FHA allows 31/43, while VA loans have no front-end cap but limit the back-end ratio to 41%.

How much house can I afford on a $100,000 salary?

On a $100,000 salary with minimal debts, 20% down, and a 6.5% rate on a 30-year mortgage, you can typically afford a home priced between $430,000 and $465,000. The exact figure depends on local property taxes (which average 1.1% nationally according to the Tax Foundation), homeowners insurance costs, and whether you carry other monthly debts. Adding $500/month in car and student loan payments would reduce your maximum by roughly $60,000-$80,000. Use the mortgage calculator to see the full payment breakdown.

Does my down payment affect how much house I can afford?

Yes, your down payment has a significant impact. A larger down payment increases your maximum affordable home price because you borrow less. Moving from 5% to 20% down on a $400,000 target home reduces the loan from $380,000 to $320,000, saving about $380/month. Importantly, putting 20% down eliminates private mortgage insurance (PMI), which typically costs 0.5% to 1.5% of the loan balance annually. Eliminating PMI alone can free up $130-$400/month in your housing budget, translating to $20,000-$60,000 in additional purchasing power.

What debts are included in the 36% debt ratio?

The 36% back-end ratio includes all recurring monthly debt obligations that appear on your credit report: your proposed housing payment (PITI), auto loans, student loans, credit card minimum payments, personal loans, child support, and any other installment debts. It does not include utilities, groceries, gas, subscriptions, or other discretionary expenses. According to the Federal Reserve, the average American household carries about $1,050/month in non-housing debt payments, which significantly reduces buying power under the 36% rule.

How does the interest rate affect my home affordability?

Interest rates have a dramatic impact on affordability. For every 1% increase in the mortgage rate, your purchasing power drops by roughly 10-12%. For instance, at 5.5% a buyer with a $2,333/month budget can afford a loan of about $411,000, but at 7.5% the same payment only supports a $332,000 loan -- a difference of nearly $80,000 in buying power. This is why shopping for the best rate across multiple lenders, or considering buying down points, can significantly expand what you can afford. Freddie Mac recommends getting quotes from at least three lenders.

What is the difference between conventional, FHA, and VA loan affordability?

Each loan type applies different DTI limits. Conventional loans (backed by Fannie Mae/Freddie Mac) typically use the 28/36 rule but may allow up to 45% back-end DTI with strong compensating factors like high credit scores or large reserves. FHA loans allow a 31% front-end and 43% back-end ratio, with down payments as low as 3.5%, making them popular with first-time buyers. VA loans for eligible veterans have no front-end cap and use a 41% back-end limit with no down payment required, often providing the most purchasing power of any loan type.

House Affordability Calculator

Quick Answer

How much house you can afford depends on your income, existing debts, and down payment. A common guideline is the 28/36 rule: spend no more than 28% of gross monthly income on housing and no more than 36% on total debt. The Consumer Financial Protection Bureau uses a 43% DTI cap as the upper bound for qualified mortgages.

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Find out how much house you can afford using the 28/36 rule based on your income and debts.

Annual Gross Income ($)

Monthly Debts ($)

Car payments, student loans, credit cards, etc.

Down Payment (%)

Interest Rate (% p.a.)

Loan Term (Years)

Maximum Home Price

Max Loan Amount $0 Down Payment Amount $0 Est. Monthly Payment $0

28% Housing Limit

$0/mo

36% Total Debt Limit

$0/mo

Binding Constraint

How House Affordability Works

House affordability is the maximum home price a buyer can reasonably purchase based on income, debts, down payment, and prevailing mortgage rates. Most U.S. lenders evaluate borrowers using the 28/36 rule, a debt-to-income (DTI) guideline endorsed by the Consumer Financial Protection Bureau (CFPB). According to the National Association of Realtors (NAR), the median existing-home price reached $407,500 in late 2025, making affordability analysis more important than ever for first-time buyers.

The 28% front-end ratio limits your total monthly housing costs -- including mortgage principal, interest, property taxes, and homeowners insurance (PITI) -- to no more than 28% of gross monthly income. The 36% back-end ratio caps your total recurring debt payments (housing plus car loans, student loans, and credit card minimums) at 36% of gross monthly income. This calculator applies whichever limit is more restrictive, then back-calculates your maximum loan using the standard mortgage amortization formula and factors in your down payment to arrive at the maximum home price.

The House Affordability Formula

The calculation follows a two-step process defined by standard mortgage underwriting guidelines used by Fannie Mae and Freddie Mac.

Step 1 -- Find maximum monthly payment:

28% limit: Max housing payment = Gross annual income / 12 x 0.28
36% limit: Max housing payment = (Gross annual income / 12 x 0.36) - Monthly debts
Use the lower of the two figures

Step 2 -- Back-calculate home price:

Max Loan = Payment x [(1+r)^n - 1] / [r x (1+r)^n], where r = monthly rate, n = total months
Max Home Price = Max Loan / (1 - Down Payment %)

Worked example: A buyer earning $100,000/year with $500/month in debts, a 20% down payment, and a 6.5% rate on a 30-year term: The 28% limit allows $2,333/month for housing. The 36% limit allows $2,500/month ($3,000 minus $500 debts). The binding constraint is 28%. Back-calculating from $2,333/month yields a max loan of roughly $369,000 and a max home price of approximately $461,000.

Key Terms You Should Know

Front-End Ratio (Housing Ratio): The percentage of gross monthly income dedicated to housing costs (PITI). Most conventional lenders cap this at 28%, though FHA loans allow up to 31%.
Back-End Ratio (Total DTI): The percentage of gross monthly income going toward all recurring debts. Conventional loans typically cap this at 36-43%, while FHA loans allow up to 43-50% with compensating factors.
PITI: Principal, Interest, Taxes, and Insurance -- the four components of a monthly housing payment that lenders evaluate.
Private Mortgage Insurance (PMI): Required when the down payment is less than 20%. PMI typically costs 0.5% to 1.5% of the loan amount annually, reducing your effective buying power.
Debt-to-Income Ratio (DTI): A key metric lenders use to assess borrowing risk. According to Fannie Mae's Selling Guide, the maximum qualifying DTI for conventional loans is generally 45% with strong compensating factors.

Affordability by Income Level

The table below shows estimated maximum home prices at various income levels, assuming a 6.5% mortgage rate, 30-year term, 20% down payment, and $500/month in existing debts. According to the U.S. Census Bureau, the median household income was approximately $80,610 in 2024.

Annual Income	28% Housing Limit	36% Total Debt Limit	Max Home Price
$60,000	$1,400/mo	$1,300/mo	~$258,000
$80,000	$1,867/mo	$1,900/mo	~$371,000
$100,000	$2,333/mo	$2,500/mo	~$464,000
$125,000	$2,917/mo	$3,250/mo	~$580,000
$150,000	$3,500/mo	$4,000/mo	~$696,000

Practical Examples

Example 1 -- First-time buyer with student loans: Sarah earns $75,000/year and has $800/month in student loan payments. Her 28% housing limit is $1,750/month, but her 36% limit is only $1,450 ($2,250 minus $800). The 36% back-end ratio is her binding constraint. At 6.5% over 30 years with 10% down, she can afford a home up to approximately $257,000. Because she is putting less than 20% down, PMI of roughly $110/month further reduces her buying power by about $17,000.

Example 2 -- Dual-income household, no debt: Mark and Lisa earn a combined $160,000 with no recurring debts. Their 28% limit is $3,733/month, and their 36% limit is $4,800/month. The 28% front-end ratio controls. With 20% down and a 6.5% rate on a 30-year mortgage, they can afford a home up to about $743,000. Using the down payment calculator, their required savings would be approximately $149,000.

Example 3 -- High-cost area buyer choosing a 15-year term: David earns $120,000 in San Francisco and wants to pay off his home faster. With $300/month in debts and a 15-year term at 5.9%, his maximum monthly payment is $2,800 (28% limit). However, the shorter term means higher monthly payments per dollar borrowed, so his max home price drops to about $425,000 with 20% down -- compared to roughly $557,000 on a 30-year term.

Tips to Maximize Your Home Buying Power

Pay down existing debt first: Every $100/month in debt payments you eliminate adds roughly $15,000-$20,000 to your maximum affordable home price by freeing up DTI capacity.
Increase your down payment: Moving from 10% to 20% down eliminates PMI (saving $100-$300/month) and reduces the loan amount, pushing your affordable price higher. Use our down payment calculator to plan savings targets.
Shop for the best rate: A 0.5% rate reduction on a $350,000 loan saves roughly $100/month, which translates to about $20,000 more in purchasing power.
Consider adjustable-rate mortgages (ARMs): A 5/1 ARM may offer a lower initial rate, increasing affordability in the short term -- but factor in the risk of rate increases after the fixed period.
Explore first-time buyer programs: FHA loans allow 3.5% down with DTI ratios up to 43%. Many states offer down payment assistance programs that can expand your budget significantly.
Account for hidden costs: Property taxes, HOA fees, maintenance (typically 1-2% of home value annually), and insurance vary widely by location and directly affect what you can afford.

2026 Housing Market Context

As of early 2026, the average 30-year fixed mortgage rate is hovering near 6.5%, according to Freddie Mac's Primary Mortgage Market Survey. The NAR's Housing Affordability Index shows that a family earning the median income can afford approximately 85% of the median-priced home -- down from over 100% in 2020 when rates were near 3%. First-time buyers now represent about 26% of all home purchases, the lowest share in decades. Understanding your true affordability through the 28/36 framework is essential for setting realistic expectations in this challenging market.

Disclaimer: This calculator is for informational purposes only and does not constitute financial, tax, or legal advice. Always consult a qualified professional for decisions specific to your situation.