Home Affordability Calculator
28/36 rule, max home price, PITI breakdown, and rate sensitivity
Last updated: November 2025 · Property tax and insurance defaults: Tax Foundation 2025, Insurify 2025
Your Finances
Pre-tax income, both spouses if filing jointly
Car, student loans, credit card minimums, child support, alimony
Property tax: 1.81% · Avg insurance: $4,400/yr
Monthly PITI at Max Price
Rate Sensitivity
A 1% rate change typically swings your max price by 10-12%.
28/36 is a ceiling, not a target
The 28/36 rule is the upper edge of what lenders consider safe, not what is financially optimal for you. Most financial planners suggest aiming closer to 20-25% of gross income on housing so you have room for retirement contributions (15%+), an emergency fund, and life. Stretching to the maximum payment crowds out everything else.
How to Use the 28/36 Rule
Front-End vs Back-End Ratio
The 28% front-end ratio caps your monthly housing costs (principal + interest + taxes + insurance + HOA + PMI) at 28% of gross monthly income. The 36% back-end ratio caps your TOTAL monthly debt payments (housing PLUS car, student loans, credit card minimums, alimony, child support) at 36% of gross monthly income. Whichever produces the lower price is your real ceiling. A high existing car payment or student loan often pulls the affordable home price below what the front-end ratio alone would suggest.
PITI, Not Just Principal and Interest
When people quote a "mortgage payment" they often mean just principal and interest. PITI is what you actually pay each month: Principal + Interest + Taxes + Insurance. On a Texas home with a 1.8% effective property tax rate and $4,400/yr insurance, taxes and insurance alone add ~$1,000/month to a $400k house. In states like New Jersey (2.1%) or Illinois (2.1%) the bite is even bigger. Always shop PITI, not just P&I.
Down Payment Options
The "20% to avoid PMI" rule is just one option. FHA loans accept 3.5% down with a 580+ FICO. Conventional Fannie Mae HomeReady and Freddie Mac Home Possible programs go to 3% down for first-time buyers. VA loans for qualifying veterans and USDA loans for rural buyers can be 0% down. Each loan type comes with its own mortgage insurance rules, FHA mortgage insurance lasts the life of the loan if you put less than 10% down, while conventional PMI drops off automatically at 78% LTV.
Why Lenders Pre-Approve You for More
A lender pre-approval is based on your DTI alone. It ignores your retirement savings rate, childcare costs, planned travel, college funding, and aggressive debt payoff plans. The "you can afford up to X" letter is the legal maximum the lender can extend, not what is wise. The 28% front-end target exists precisely to leave room for the rest of your financial life.
Frequently Asked Questions
What is the 28/36 rule?
Housing costs (PITI + HOA + PMI) should not exceed 28% of gross monthly income; total recurring debt should not exceed 36%. Whichever produces the lower max price is the real ceiling.
What is debt-to-income ratio (DTI)?
Total monthly debt payments divided by gross monthly income. Conventional caps are typically 43-45%, FHA can go to 50% with compensating factors. Under 36% is the safer target.
How much down payment do I need?
Conventional 3% for first-time buyers (HomeReady, Home Possible), FHA 3.5% with 580+ FICO, VA and USDA 0% for qualifying borrowers. 20% avoids PMI on conventional loans.
How and when does PMI come off?
Conventional PMI is automatically cancelled at 78% LTV under the Homeowners Protection Act. You can request manual removal at 80%. FHA mortgage insurance with less than 10% down lasts the life of the loan, only refinancing removes it.
How much should I budget for closing costs?
2-5% of the purchase price covering origination, appraisal, title insurance, escrow setup, prepaid taxes and insurance, and recording fees. Some can be negotiated as seller credits.
Why does my lender pre-approve me for more than I can comfortably afford?
Lenders qualify on DTI alone. They ignore your retirement savings, childcare, college funding, and lifestyle. The pre-approval letter is the regulatory ceiling, not the wise number for your specific situation.