Home Affordability Calculator: The 28/36 Rule and What Lenders Actually Use

"How much house can I afford?" is the first question in any home purchase, and the answer most people get — from friends, from rule-of-thumb articles, from early Zillow estimates — is often wrong in ways that either limit their search unnecessarily or set them up for financial strain.

Our  runs the full calculation. This guide explains the actual method lenders use and what the standard rules miss.

The 28/36 rule: starting point

The 28/36 rule is the traditional guideline for housing affordability:

• 28% rule (front-end ratio): Your monthly housing payment (PITI — principal, interest, taxes, insurance) should not exceed 28% of gross monthly income.
• 36% rule (back-end ratio): Your total monthly debt payments (housing + all other debt) should not exceed 36% of gross monthly income.

Example: $90,000 annual income

Gross monthly income: $90,000 / 12 = $7,500

Max housing payment (28%): $7,500 x 0.28 = $2,100/month PITI

Max total debt (36%): $7,500 x 0.36 = $2,700

If you have $400/month in car and student loan payments: max housing = $2,700 - $400 = $2,300/month

Binding constraint: the 28% front-end limit at $2,100.

What lenders actually use today

The 28/36 rule is a guideline from the 1970s. Modern lenders, particularly for conventional loans (Fannie Mae/Freddie Mac guidelines), use different thresholds:

Loan type	Front-end limit	Back-end (DTI) limit
Conventional (standard)	28%	36-43%
Conventional (with DU approval)	Up to 45%	Up to 50%
FHA loan	31%	43% (up to 50% with strong compensating factors)
VA loan	No limit	41% guideline (flexible with residual income)
USDA loan	29%	41%

Many lenders now use automated underwriting systems (AUS) that can approve loans with back-end DTI up to 50% when other factors are strong — high credit score, significant down payment, large cash reserves. The stated guidelines are floors, not absolute ceilings.

What counts in your DTI

Lenders count all recurring monthly debt obligations:

• Proposed housing payment (PITI including PMI if applicable)
• Car loans and leases
• Student loan payments (minimum payment or 1% of balance for income-driven plans)
• Credit card minimum payments
• Personal loan payments
• Child support and alimony
• Other real estate mortgages

What does NOT count: utilities, groceries, childcare, subscriptions, 401(k) contributions. These affect your actual monthly cash flow but not your DTI for qualification purposes.

Working backward: how much house does the limit buy?

Step 1: Find your max PITI

Income: $100,000/year = $8,333/month gross

Other debts: $600/month (car + student loans)

Front-end max (28%): $8,333 x 0.28 = $2,333

Back-end max (43%): ($8,333 x 0.43) - $600 = $3,583 - $600 = $2,983

Binding constraint: $2,333 PITI

Step 2: Back out taxes and insurance

Estimate monthly property tax (1.1% of purchase price annually / 12) and homeowners insurance (~$150/month).

On a $400,000 home: tax = $400,000 x 0.011 / 12 = $367/month. Insurance = $150/month.

Available for P&I: $2,333 - $367 - $150 = $1,816

Step 3: Find the loan amount

At 7% / 30-year, the payment per $1,000 of loan = $6.65/month.

Max loan = ($1,816 / $6.65) x $1,000 = $273,000

With 20% down: purchase price = $273,000 / 0.80 = $341,000

What the ratios do not tell you

Qualifying for a mortgage and comfortably affording a mortgage are different things. The DTI ratios ignore:

• Childcare costs: Can be $1,500-3,000/month for young families — a massive cash flow item invisible to lenders.
• Maintenance and repairs: Budget 1-2% of home value per year. On a $400,000 home, that is $4,000-8,000 annually or $333-667/month.
• Career stability: A 43% DTI works if your income is stable. It becomes a crisis if you lose your job.
• Emergency fund: After closing costs and the down payment, how much do you have left? Many lenders approve borrowers with thin reserves.
• Retirement savings: If you are not contributing to retirement to afford the housing payment, that is a long-term cost the DTI ratio does not capture.

A more conservative approach

Many personal finance advisors recommend keeping housing under 25% of gross income and total debts under 30% — notably more conservative than lenders require. The rationale: lenders want to approve loans; your goal is to afford your life comfortably.

A useful test: calculate what happens to your housing costs if you lose your job and need 3-6 months to find a new one. Do you have enough savings to cover housing and living expenses through that period?

Use the  to run your numbers with your actual income, debts, estimated local tax rates, and down payment — it shows maximum purchase price under both front-end and back-end constraints and flags which one is binding.