How lenders decide what you can afford
Underwriters look at two debt-to-income (DTI) ratios. The front-end ratio caps your full housing payment — principal, interest, property taxes, and insurance (PITI) — at 28% of gross monthly income. The back-end ratio caps all monthly debt payments, housing included, at 36%. Whichever limit is lower is your real budget, and this calculator reports which one binds you. Some programs stretch to 43–50% back-end, but 28/36 is the conservative benchmark that keeps a mortgage comfortable.
Worked example
On $100,000 income ($8,333/month) with $400/month in debts: the front-end cap is $2,333 and the back-end cap is $3,000 − $400 = $2,600, so the front-end binds. At 6.75% over 30 years with $60,000 down and 1.5%/yr taxes+insurance, that supports roughly a $350,000 home. Cut the car payment and nothing changes here — but at higher debt loads, the back-end takes over fast.
Ways to afford more house
- Pay down monthly debts first — each $100/month of debt removed adds roughly $15,000 of house at current rates.
- Buy points or shop rates — every 1% off the rate adds ~10% buying power (see the sensitivity table).
- Bigger down payment — adds price dollar-for-dollar and can remove PMI.
- Check your take-home first — the 28% rule uses gross income; our state take-home pay calculator shows what actually lands in your account.
Frequently asked questions
How much house can I afford on my salary?
Roughly 3–4× gross annual income as a rule of thumb, but the binding constraint is the 28/36 DTI rule this calculator applies — debts and rates move the answer a lot.
What is the 28/36 rule?
Housing payment ≤ 28% of gross monthly income; all debt payments ≤ 36%. The lower resulting budget wins.
Does the calculator include PMI?
No. If you put down less than 20%, expect PMI of roughly 0.3%–1.5% of the loan per year — you can approximate it by raising the tax+insurance percentage.
How much does 1% in rate change affordability?
About 10% of loan amount per point. The ±1% sensitivity rows in your result show the exact swing for your inputs.