The 28/36 rule — and why lenders care
The 28/36 rule is the gold-standard affordability guideline used by mortgage underwriters. It says your housing costs (front-end DTI) should not exceed 28% of gross monthly income, and your total debt payments (back-end DTI) should not exceed 36%. This calculator enforces both limits and shows you the maximum home price that fits.
What's included in PITI?
PITI = Principal + Interest + Taxes + Insurance. Some lenders also include HOA dues and PMI in the front-end calculation. Property taxes vary widely by state — from 0.31% in Hawaii to 2.49% in New Jersey — and dramatically affect affordability.
Why being approved doesn't mean you can afford it
Lenders use gross income, but you pay bills with net income. A $120,000 gross salary might only bring home $7,000/month after taxes. A $3,360 monthly PITI payment (28% of gross) eats up 48% of take-home pay — leaving little room for food, transportation, childcare, and savings. Many buyers "house poor" themselves by borrowing the maximum.
Buy a home you can afford on one income if you're a dual-income couple. If one of you loses a job, gets sick, or takes parental leave, you won't be forced to sell in a down market.
Frequently asked questions
What is the 28/36 rule?
A classic affordability guideline: spend no more than 28% of gross monthly income on housing (front-end DTI), and no more than 36% on all debt combined (back-end DTI). Lenders use this as a sanity check. Going above 36% back-end DTI requires strong compensating factors.
How much house can I afford on a $100K salary?
Using the 28/36 rule with 20% down and current rates (~6.8%), you can afford roughly $350,000-$400,000 on $100K income. With 5% down, that drops to ~$300,000. In high-property-tax states, reduce these numbers by $50K-$75K.
Should I borrow the maximum the lender approves?
Rarely. Lenders use gross income, but you pay bills with net income. A $100K salary brings home ~$6,000/month after taxes. A $2,800 monthly PITI payment eats 47% of take-home — leaving little for food, transportation, childcare, and savings. Many buyers become 'house poor' this way.
What costs are included in PITI?
Principal (loan paydown), Interest (cost of borrowing), Taxes (property taxes, ~1.2% of value annually on average), Insurance (homeowners insurance, ~0.35% of value annually). Some lenders also include PMI and HOA dues in the calculation.
How does my down payment affect affordability?
Larger down payment = smaller loan = lower monthly payment = more house you can 'afford' on the same income. But a 20% down payment on a $500K house is $100K — money that's then tied up in an illiquid asset. Don't drain your emergency fund to put more down.
Does the calculator account for property tax differences by state?
Yes — you can input your local property tax rate. Hawaii averages 0.31%; New Jersey averages 2.49%. On a $400K home, that's the difference between $103/month and $830/month — a huge affordability swing.
What is 'house poor'?
When your housing costs consume so much of your income that you can't afford other essentials or savings. Generally: housing above 35% of take-home pay (not gross) puts you at risk. Above 45%, you're definitely house poor.
Glossary of key terms
- Front-End DTI
- Housing costs (PITI) ÷ gross monthly income. Conventional loans prefer ≤28%.
- Back-End DTI
- All monthly debt ÷ gross monthly income. Conventional loans cap at 36-43%.
- 28/36 Rule
- Classic affordability guideline: ≤28% front-end, ≤36% back-end.
- PITI
- Principal, Interest, Taxes, Insurance — the four components of monthly housing cost.
- House Poor
- When housing costs consume so much income that other essentials and savings suffer.
Common mistakes to avoid
- Borrowing the maximum the lender approves — lenders use gross income; you pay bills with net income
- Forgetting property taxes and insurance in the affordability calculation
- Draining emergency fund to make a larger down payment
- Not accounting for maintenance and repairs (1-2% of home value annually)
- Buying in a high-cost area just because the lender approved it
Pro tips
- Aim to spend no more than 25% of your TAKE-HOME pay (not gross) on housing — gives you buffer for the unexpected.
- Get pre-approved before house hunting — but don't treat the approval amount as your budget.
- Buy a home you can afford on one income if you're a dual-income couple — protects against job loss.
- Factor in HOA dues, PMI, and special assessments — these can add hundreds per month.
- Live below your means for the first year after buying — confirms you can handle the payment before lifestyle creep.
Results are estimates for educational purposes only and not financial advice. Consult a licensed professional for advice specific to your situation.