How the 28/36 rule works
Lenders do not start with the house — they start with your income. The classic qualification test applies two ceilings to your gross monthly income:
- Front-end ratio ≤ 28%: your full housing payment (principal, interest, taxes, insurance, HOA) stays under 28% of gross monthly income.
- Back-end ratio ≤ 36%: that same housing payment plus every recurring monthly debt — car loan, credit cards, student loans, child support — stays under 36%.
This calculator subtracts your monthly tax, insurance and HOA estimates from whichever ceiling is lower, converts what remains into a maximum loan using the standard amortization formula in reverse, and finally adds your down payment to reach a maximum home price.
Worked example: $100,000 income with $500 of monthly debts
A household earning $100,000 a year has a gross monthly income of about $8,333. The 28% front-end ceiling is roughly $2,333 a month; after $500 of car and card payments, the 36% back-end ceiling allows about $2,500 — so the tighter, front-end rule governs. Subtract $450 for typical taxes and insurance and about $1,883 a month is left for principal and interest. At a 7% rate over 30 years that supports a loan of roughly $283,000, which means a maximum price near $343,000 with a $60,000 down payment. The back-end ratio lands at 34% — comfortably inside the guideline.
What lenders actually allow beyond 28/36
The 28/36 rule is a conservative screen, not a legal cap. Many conventional loans are approved with back-end ratios up to 43% — the ceiling for a Qualified Mortgage — and FHA loans sometimes stretch near 50%. Borrowing at those levels is possible but fragile: one emergency or rate reset can break a budget running at half its gross income. Treat 28/36 as the comfort zone and higher ratios as territory that demands its own plan. If you already have a price in mind, run it through our Mortgage Payment Calculator to see the full monthly cost.
Five ways to raise your number
- Pay down monthly debts: every dollar of card or car payment you remove frees roughly $150 of loan capacity at today's rates.
- Save a bigger down payment: the loan-to-price math is linear — an extra $10,000 down adds $10,000 of price at the same payment.
- Shop the rate: a 0.5% lower APR adds roughly 5% to your buying power at current levels.
- Lengthen the term: a 30-year term borrows about 40% more per monthly dollar than a 15-year term.
- Target lower-tax areas: property tax swings of $200 a month between counties move your price ceiling by tens of thousands.