Maximum Home Price
Maximum Loan Amount
Est. Monthly Payment
Results are based on the 28/36 rule and do not include property taxes, insurance, or HOA fees. This calculator is for guidance only.
Table of Contents
A Conservative, Lender-Realistic Affordability Estimate
This calculator applies the long-standing 28/36 rule — the same framework most US mortgage lenders use as their conservative baseline — to your income, existing debts, down payment, rate, and term. It returns the maximum home price you can responsibly target before adding property tax, insurance, and life cushion on top.
How the affordability calculation works
The calculator applies the 28/36 rule, taking the lower of the two limits, then back-solves for the maximum loan and maximum home price using the standard amortization formula.
Step 1: Front-end (housing) limit — 28% of gross monthly income
Max housing payment = (Annual income ÷ 12) × 0.28
Step 2: Back-end (total debt) limit — 36% of gross monthly income
Max housing from DTI = (Annual income ÷ 12) × 0.36 − Existing monthly debts
Step 3: Take the lower of the two and back-solve for loan amount
Max loan = M × [ 1 − (1+r)−n ] ÷ r
- M — the lower of the two payment limits above
- r — monthly interest rate (annual rate ÷ 12)
- n — total monthly payments (term × 12)
Worked example using the calculator's defaults ($80,000 income, $300 monthly debts, $40,000 down, 6.5% APR, 30-year term):
- Gross monthly = $80,000 ÷ 12 = $6,666.67
- 28% front-end limit = $6,666.67 × 0.28 = $1,866.67
- 36% back-end limit = ($6,666.67 × 0.36) − $300 = $2,400 − $300 = $2,100.00
- Lower of the two = $1,866.67 (front-end binds)
- r = 0.0054167, n = 360, max loan ≈ $295,500
- Max home price = $295,500 + $40,000 = $335,500
Whether the front-end or back-end is binding depends on how much existing debt you carry. With more existing debt, the back-end becomes the binding constraint and the affordable home price falls.
Where the 28/36 rule comes from
The rule originated from underwriting standards used by Fannie Mae and Freddie Mac in the 1970s and was widely adopted by the broader mortgage industry. Subsequent research, including post-2008 work by the Federal Reserve, found that mortgages with DTI above the 28/36 threshold defaulted at meaningfully higher rates — particularly in income or property-value shocks. The Qualified Mortgage rule (CFPB, 2014) lifted the back-end cap to 43% for QM loans, and non-QM products go higher still, but the 28/36 rule remains the industry's conservative benchmark.
Affordability at different income levels
How the 28/36 rule maps to home price at typical rates and a 10% down payment ($300/month existing debts, 6.5% APR, 30-year term):
| Annual income | Max housing payment | Max loan | Max home price |
|---|---|---|---|
| $50,000 | $1,167 | $184,700 | $205,200 |
| $75,000 | $1,750 | $277,000 | $307,800 |
| $100,000 | $2,333 | $369,300 | $410,300 |
| $150,000 | $3,500 | $554,000 | $615,500 |
| $200,000 | $4,667 | $738,700 | $820,800 |
Higher rates compress these numbers fast. The same $100,000 income at 7.5% APR (instead of 6.5%) qualifies for about $336,000 home price instead of $410,000 — a 20% drop in buying power for a 1-point rate move.
Hidden costs not captured by the 28/36 result
The 28/36 rule is built around principal, interest, taxes, and insurance — but most lenders apply it loosely. A complete affordability picture also accounts for:
- Property tax: 0.3% (Hawaii) to over 2.5% (New Jersey) of home value annually. On a $350,000 home, that's $1,050 to $8,750/year — $90 to $730/month.
- Homeowners insurance: $1,000–$4,000/year typical, much higher in flood zones, hurricane corridors, or wildfire-prone areas.
- PMI: 0.5–1.5% of loan amount annually if down payment is under 20% on a conventional loan. Removable once you reach 20% equity.
- HOA fees: common in condos, townhomes, and planned developments. Range from $50 to over $1,000/month.
- Maintenance: classic rule of thumb is 1% of home value per year. Older homes or harsh climates run higher.
- Closing costs: 2–5% of the loan amount, one-time at closing. Must be paid in cash on top of the down payment.
Maximum affordability vs maximum approval
Three numbers usually exist:
- What the 28/36 rule says you can afford comfortably — this calculator.
- What the lender will approve you for — typically up to 43% DTI, sometimes higher. Can be 20–40% more home than the 28/36 number.
- What you should actually buy — usually 10–20% below the 28/36 number, to leave headroom for the hidden costs above plus retirement savings, kids, and emergencies.
Getting pre-approved is useful — it confirms financing and gives sellers confidence in your offer — but treat the pre-approval ceiling as an upper bound, not a target.
Limitations of this calculator
- Calculates principal and interest only. Real affordability is constrained by taxes, insurance, PMI, HOA, and maintenance — all of which vary by location.
- Uses the conservative 28/36 thresholds. Lenders may approve you for more under QM (43% back-end) or non-QM (50%+) programs.
- Does not account for student loans in deferment, future income changes, or planned life events (children, career change, retirement timing).
- Does not factor in regional market dynamics — in high-cost metro areas the calculator's result may not buy a habitable property at all, while in lower-cost areas you may comfortably buy below it.
Sources & references
- Consumer Financial Protection Bureau — Owning a Home — standard underwriting ratios, Qualified Mortgage rule, and affordability guidance.
- Federal Housing Finance Agency — conforming loan limits and Fannie/Freddie underwriting standards.
- US Department of Housing and Urban Development — FHA, USDA, and first-time buyer program rules.
- Federal Reserve — Economic Research — research on DTI ratios and mortgage default risk.
FAQs
Pre-approval letters often use a back-end DTI of 43% (or higher under non-QM programs), while this calculator uses the more conservative 28/36 rule. A lender showing you the maximum you could qualify for at 43% DTI is showing the ceiling, not the comfortable budget. Most financial planners recommend spending 10–20% below your pre-approval to leave room for property tax, insurance, maintenance, and life events the lender ignores.
No — the result shows the maximum principal-and-interest payment the 28/36 rule allows. The actual PITI payment (Principal, Interest, Taxes, Insurance) that hits your bank account each month will be 20–40% higher depending on local property tax rates and whether PMI applies. As a rule of thumb, multiply the estimated monthly payment by about 1.25 to approximate PITI in an average tax state.
Substantially. The back-end (36%) limit is your total debt as a share of income, including the new mortgage. On a $80,000 income (about $6,667/month), 36% is $2,400. If you have $300/month in existing debt, you have $2,100 available for housing. Eliminating that $300 raises your housing budget by the same $300/month — which at 6.5% over 30 years equates to about $47,000 of additional home you can finance.
The 28/36 rule originated in the 1970s when interest rates were higher and mortgage products simpler. Modern lenders — particularly under the Qualified Mortgage rules — will often approve borrowers up to 43% DTI, and some non-QM products go to 50%. The trade-off is risk: borrowers near the lender cap have very little cushion for emergencies, repairs, or income drops. The 28/36 rule keeps that cushion intact.
Almost universally no. Beyond the lender numbers, three buckets of cost get under-counted by first-time buyers: maintenance (typical rule of thumb is 1% of home value per year), property tax (varies from 0.3% to over 2.5% of home value annually by state), and homeowners insurance ($1,000–$4,000/year, much higher in flood or wildfire zones). Add lifestyle, retirement savings, and child-related expenses, and stretching to the calculator's maximum usually leaves no margin.