The 28/36 rule
Many lenders want your total housing payment (principal, interest, property tax, insurance, PMI, and HOA) to stay under 28% of your gross monthly income, and all your debt payments together, including the new mortgage, under 36%. The calculator uses whichever limit is tighter.
FHA loans allow more, often 31% and 43%, and some lenders go higher with strong credit or large savings. Being approved for a payment doesn't mean it fits your budget, so leave room for repairs, savings, and the rest of your life.
What moves the number most
- Interest rate: each percentage point changes your buying power by roughly 10%.
- Other debts: when the 36% limit is the tighter one, every $100 of monthly debt cuts what you can borrow by roughly $15,000 at a 6.5% rate.
- Down payment: 20% down avoids PMI on a conventional loan and lowers the payment.
- Property tax: rates range from under 0.5% to over 2% of the home's value depending on where you live.
Frequently asked questions
Should I use gross or take-home pay?
Lender ratios use gross income, before taxes. For your own budget, it's smart to check the payment against your take-home pay too. Our paycheck calculator can help.
Does this include closing costs?
No. Plan for closing costs of a few percent of the loan amount on top of your down payment.
What counts as monthly debt?
Minimum payments on car loans, student loans, credit cards, personal loans, and child support or alimony. Rent, utilities, and phone bills don't count.