How it works
The calculator applies the 28/36 debt-to-income rule. It divides your annual gross income by 12, then finds two limits: 28% of monthly income for housing (the front-end ratio) and 36% of monthly income minus your other monthly debts (the back-end ratio). The lower limit becomes your maximum monthly housing payment.
That payment must cover principal and interest, property tax, homeowners insurance, and HOA dues. Because property tax grows with the home price, the calculator solves for the price at which the full payment exactly equals your limit. Your down payment is added on top of the loan you can carry.
- Monthly debts include car loans, student loans, minimum card payments, and other recurring loan payments. Do not include rent you will stop paying.
- Property tax is entered as a yearly percentage of the home price.
- Insurance is yearly; HOA is monthly.
The equation
Affordability formula
- I
- gross monthly income (annual income ÷ 12)
- f
- amortization factor r(1 + r)ⁿ ÷ [(1 + r)ⁿ − 1], with r = annual rate ÷ 12 ÷ 100 and n = years × 12 (1 ÷ n when the rate is 0)
- t
- monthly property tax rate, equal to annual tax % ÷ 12 ÷ 100
- Ins, HOA
- monthly insurance (annual ÷ 12) and monthly HOA dues
Step-by-step example
Worked example: $80,000 salary
Income of $80,000 is $6,666.67 a month. The 28% limit is $1,866.67 and, with no other debts, the 36% limit is $2,400, so the maximum payment is $1,866.67. With $30,000 down, 6.5% for 30 years, 1.1% property tax, and $1,800 a year of insurance:
If the same buyer also had $800 a month of car and student loan payments, the 36% rule would limit housing to $1,600 and the maximum price would drop to about $226,550.
Values are rounded for display.
Questions answered
Home affordability FAQ
What is the 28/36 rule?
The 28/36 rule says total monthly housing costs (principal, interest, property tax, insurance, and HOA) should be no more than 28% of gross monthly income, and all monthly debt payments including housing should be no more than 36%. The lower of the two limits sets your maximum payment.
How much house can I afford on $80,000 a year?
With no other debts, a $30,000 down payment, a 6.5% 30-year rate, 1.1% property tax, and $1,800 a year of insurance, the 28/36 rule supports a maximum monthly payment of about $1,867 and a home price of roughly $263,000. Car or student loan payments can lower that figure.
Does this calculator include mortgage insurance and closing costs?
No. PMI or other mortgage insurance and closing costs are not included. If you put less than 20% down, add your lender's mortgage insurance estimate to your budget and keep cash aside for closing costs.
Is the 28/36 rule the same as lender approval?
No. Many lenders allow higher debt-to-income ratios depending on the loan program, credit score, and reserves. The 28/36 rule is a conservative planning guideline, not a loan approval or quote.