Home Affordability Calculator

What is the 28/36 Rule?

The 28/36 rule is a common guideline used by mortgage lenders to determine how much house you can comfortably afford. It states that your housing expenses should not exceed 28% of your gross monthly income, and your total debt payments should not exceed 36% of your gross monthly income.

• The 28% Rule (Front-End Ratio): Your total monthly housing payment (PITI + PMI: Principal, Interest, Taxes, Insurance, and Private Mortgage Insurance if applicable) should be less than 28% of your gross monthly income.
• The 36% Rule (Back-End Ratio): Your total monthly debt payments (PITI + PMI + all other debts like car loans, student loans, and credit cards) should be less than 36% of your gross monthly income.

What is PMI?

Private Mortgage Insurance (PMI) is typically required by lenders when your down payment is less than 20% of the home's purchase price. It protects the lender in case you default on the loan. PMI is usually an annual premium, broken down into monthly payments added to your mortgage bill. Compare buying with Renting vs. Buying to see what fits your lifestyle.

How This Calculator Works

This calculator applies both parts of the 28/36 rule to find the most conservative (and safest) affordable home price for you.

1. It first calculates your Max Monthly Housing Payment by finding the lower of the two rules (including PITI + PMI).
2. It then subtracts your estimated monthly property taxes and home insurance from this Max Monthly Housing Payment.
3. If your down payment is less than 20%, it also subtracts an estimated monthly PMI payment (based on the estimated loan amount and PMI rate). Since PMI depends on the loan amount, which depends on the affordable price, the calculator iterates to find a consistent solution.
4. The remaining amount is the maximum you can afford for Principal & Interest (P&I).
5. Finally, it works backward using your interest rate and loan term to find the Max Loan Amount that P&I payment will support.
6. Your affordable home price is your Max Loan Amount + Your Down Payment Amount (calculated from the percentage).

A Guideline, Not a Guarantee

Remember, this is a guideline. Just because you *can* be approved for this amount doesn't always mean you *should* borrow it. This calculation doesn't account for other costs of homeownership (like maintenance, repairs, utilities) or your other financial goals. Consider using the Mortgage vs. Invest Calculator to plan your long-term strategy once you buy.