Find out how much home you can afford based on your income, debts, and down payment. Uses the 28/36 qualifying rule used by most lenders.
| Annual Income | Max Monthly PITI | Approx. Loan | Approx. Home Price |
|---|---|---|---|
| $40,000 | $933 | $142,000 | ~$178,000 |
| $55,000 | $1,283 | $196,000 | ~$245,000 |
| $70,000 | $1,633 | $249,000 | ~$311,000 |
| $85,000 | $1,983 | $302,000 | ~$378,000 |
| $100,000 | $2,333 | $356,000 | ~$445,000 |
| $130,000 | $3,033 | $463,000 | ~$579,000 |
| $160,000 | $3,733 | $570,000 | ~$712,000 |
| $200,000 | $4,667 | $712,000 | ~$890,000 |
Estimates assume 20% down, no existing debts, 1.1% property tax, $1,500/yr insurance. Your actual maximum depends on credit score, debt load, lender, and loan type.
When you apply for a mortgage, lenders use two key debt-to-income (DTI) ratios to determine how much they will lend you. Understanding these ratios before you shop helps you set a realistic home-buying budget.
The front-end ratio measures your total monthly housing costs as a percentage of gross monthly income. Housing costs include:
Most conventional lenders cap the front-end ratio at 28%. FHA loans allow up to 31%.
The back-end ratio adds all monthly minimum debt payments to your housing costs and divides by gross income. Debts counted include car loans, student loans, personal loans, child support/alimony, and minimum credit card payments. Utility bills and groceries are not counted.
Conventional lenders generally cap the back-end ratio at 36%, though many will approve loans up to 43–50% DTI for borrowers with strong credit scores and large down payments. FHA allows up to 43%.
Qualifying for the maximum loan amount is not the same as affording the home comfortably. Homeownership comes with costs beyond the mortgage: maintenance averages 1–2% of home value per year, utilities are higher than renting, and unexpected repairs (roof, HVAC, plumbing) can cost thousands. Many financial advisors recommend targeting 25% or less of gross income for housing to preserve savings capacity and financial resilience.
The down payment affects affordability in multiple ways. A larger down payment:
Common down payment scenarios: Conventional loans require as little as 3% (but PMI applies below 20%). FHA loans require 3.5% with a credit score of 580+. VA loans (veterans) and USDA loans (rural areas) allow 0% down.
Your credit score directly influences your mortgage interest rate, which in turn drives your monthly payment and total cost. A 760+ score typically qualifies for the best available rates. A score below 640 may disqualify you from conventional financing or result in a rate 1–2 percentage points higher, which can reduce your buying power by 10–20%. Improving your score before applying — by paying down credit cards and correcting errors — can be one of the highest-ROI moves a homebuyer makes.
Let's walk through a complete example using the 28/36 rule:
Front-end limit (28%): $7,083 × 0.28 = $1,983/month for housing (PITI)
Back-end limit (36%): $7,083 × 0.36 = $2,550 total debt; minus $350 car = $2,200 for housing
The front-end ratio is more restrictive at $1,983/month. Subtracting estimated property tax (~$270/mo), insurance (~$125/mo), and no PMI (assuming 20%+ down), leaves about $1,588/month for principal and interest.
At 6.8% for 30 years, $1,588/month P&I supports a loan of roughly $242,000. Adding the $45,000 down payment gives a maximum home price of approximately $287,000.
At the conservative 25% rule: $7,083 × 0.25 = $1,771/month, yielding a home price around $254,000.
The 28/36 rule is a standard lender guideline: your monthly housing costs (principal, interest, property tax, and insurance — PITI) should not exceed 28% of your gross monthly income (front-end ratio), and your total monthly debt payments (housing + car loan + student loans + credit cards) should not exceed 36% of gross monthly income (back-end ratio). Lenders use both ratios to qualify you.
On an $80,000 annual salary (about $6,667/month gross), the 28% front-end rule allows up to $1,867/month for housing costs. With a 6.8% rate on a 30-year loan and $40,000 down, that translates to roughly a $280,000–$310,000 home price, depending on property taxes, insurance, and existing debts. Our calculator iterates to find the exact figure.
The front-end (housing) ratio compares only your monthly mortgage payment (PITI) to your gross income. The back-end (total debt) ratio compares all monthly debt payments — housing plus car loans, student loans, minimum credit card payments, and other installment debts — to your gross income. Lenders qualify you on whichever ratio produces the lower affordable home price.
Yes, in two ways. A larger down payment reduces the loan amount, which lowers your monthly principal and interest payment, letting you afford a higher-priced home on the same income. It also eliminates Private Mortgage Insurance (PMI) once your down payment reaches 20% of the home price, freeing up more monthly budget for the loan itself.
Private Mortgage Insurance (PMI) is required by most conventional lenders when your down payment is less than 20% of the home value. It protects the lender if you default. PMI typically costs 0.2%–1.5% of the loan amount per year. Once your equity reaches 20% of the original appraised value (either via payments or appreciation), you can request PMI cancellation. It is automatically removed at 22% equity under federal law (Homeowners Protection Act).
The 28/36 rule is the standard used by most conventional mortgage lenders (Fannie Mae/Freddie Mac guidelines). The more conservative 25% rule (housing ≤ 25% of gross income) is recommended by many personal finance experts to leave more budget room for maintenance, emergencies, and retirement savings. Our calculator shows both. If you have no other debts, the 28% limit may be fine; if you carry significant debts or want financial flexibility, aim for 25% or lower.