"How much house can I afford?" is the first question every buyer asks — and the easiest to get wrong. Lenders don't guess; they use simple ratios. Once you know them, you can set a realistic budget before you fall in love with a listing you can't sustain.
Key takeaways
- The 28/36 rule: ≤28% of gross income on housing, ≤36% on total debt.
- Your payment is PITI — Principal, Interest, Taxes, Insurance.
- A bigger down payment cuts the loan, the payment, and often the rate.
- Affordability ≠ the maximum a bank will lend you.
The 28/36 rule
Most lenders apply two limits based on your gross (pre-tax) monthly income:
- 28% front-end ratio: total housing cost (PITI) should stay under 28% of gross monthly income.
- 36% back-end ratio: all debt payments — housing plus car loans, student loans, and credit-card minimums — should stay under 36%.
What makes up the payment (PITI)
| Part | What it is |
|---|---|
| Principal | Repaying the amount you borrowed |
| Interest | The lender's charge on the loan |
| Taxes | Property tax, usually collected monthly |
| Insurance | Homeowner's (and sometimes mortgage) insurance |
A worked example
Say you earn 6,000/month gross and have a 400 car payment.
- Housing limit (28%): 6,000 × 0.28 = 1,680 for PITI.
- Total-debt limit (36%): 6,000 × 0.36 = 2,160 − 400 car = 1,760 available for housing.
- The lower number wins, so budget about 1,680/month for the home.
At ~6.5% over 30 years, a 1,680 PITI roughly supports a ~250,000–270,000 home after taxes and insurance — less than many buyers expect, which is exactly why running it early matters.
Find your number
Plug in price, rate, term, and down payment to see your monthly mortgage instantly.
Open the Mortgage Calculator →5 things buyers forget
- Closing costs (2–5% of price) on top of the down payment.
- Maintenance — budget ~1% of home value per year.
- Mortgage insurance if your down payment is under 20%.
- Rate changes if you choose an adjustable mortgage.
- Lifestyle — the max loan rarely leaves room to live comfortably.
Frequently asked questions
What is the 28/36 rule?
Spend ≤28% of gross monthly income on housing and ≤36% on total debt including housing.
What does PITI mean?
Principal, Interest, Taxes, and Insurance — the four parts of a typical monthly payment.
Does a bigger down payment help?
Yes — it lowers the loan and payment, can remove mortgage insurance, and may earn a better rate.
Related tools
This article is for general information only and is not financial advice. See our Disclaimer.