How this calculator works
The common 28/36 guideline: total housing costs up to 28% of gross monthly income, and all debt payments including housing up to 36%. The lower limit sets the payment; what is left after tax, insurance and HOA is turned into a loan amount at your rate. Lenders apply their own limits, so treat this as a starting point.
- Front-end limit = gross monthly income × 28%. Back-end limit = gross monthly income × 36% − other monthly debt payments.
- Housing budget = the lower of the two; mortgage payment (principal + interest) = housing budget − property tax, insurance and HOA.
- Loan amount = payment × (1 − (1 + r)⁻ⁿ) ÷ r, with r the monthly rate and n the months in the term. Home price = loan + down payment.
Worked example
With these inputs: gross yearly household income $90,000; other monthly debt payments $400; down payment $30,000; mortgage rate 6.5%; term 30; property tax, insurance and hoa per month $450.
The result is home price up to $291,047.85, with monthly housing payment $2,100.00 and mortgage (principal + interest) $1,650.00. Down payment below 20% usually adds mortgage insurance; include it in the monthly property costs if it applies.
Why debts lower the price so quickly
Every dollar of car loan, student loan or card minimum comes straight out of the 36% limit. Once that limit is the lower one, each $100 a month of other debt removes $100 from the mortgage payment — nearly $16,000 of home price at a 6.5% 30-year rate. That's why paying off a car loan before applying can raise your budget more than a raise would.
The Debt-to-Income Ratio Calculator shows both ratios on your current numbers, and the Debt Snowball Calculator plans which debt to clear first.
What the payment should include
A mortgage payment is usually more than principal and interest. Property tax and homeowners insurance are often collected monthly into escrow, and a condo or planned community adds HOA dues. With less than 20% down, a conventional loan usually adds private mortgage insurance until you reach enough equity. Put all of these in the monthly property-costs field so the price is realistic.
Closing costs, moving, and an emergency fund come out of cash, not the payment. Keep them separate from the down payment so you don't empty your savings to buy.
Sources
Frequently asked questions
How much house can I afford on my salary?
Take 28% of gross monthly income for housing, check that housing plus other debts stays under 36%, subtract taxes, insurance and HOA, and turn the rest into a loan. In the example — $90,000 income, $400 other debts, $30,000 down, 6.5% for 30 years, $450 property costs — that's a home price up to $291,047.85.
What is the 28/36 rule?
A common guideline: spend no more than 28% of gross monthly income on housing and no more than 36% on all debt payments including housing. Lenders set their own limits and some allow higher ratios, but 28/36 is a comfortable starting point.
Does the down payment change how much house I can afford?
It adds directly to the price: the loan is set by the payment you can carry, and the down payment sits on top. A larger down payment can also remove mortgage insurance, which frees more of the payment for the loan.
What if the calculator says I'm over the guideline?
Your other debts and property costs already use the 36% limit, so the rule leaves nothing for a mortgage. Paying down other debt raises the budget fastest.
Should I include property tax and insurance?
Yes. They're part of the monthly housing payment lenders count. Look up the property tax rate for the area and get an insurance quote; include HOA dues and mortgage insurance if they apply.