Before you browse a single listing, there’s one number every buyer needs to know: how much house you can actually afford. It’s the difference between comfortable homeownership and years of financial stress. Lenders answer this question with a simple guideline called the 28/36 rule — and in this guide, you’ll learn how to apply it yourself, step by step, with a real worked example. (Prefer to skip the manual math? Our free mortgage affordability calculator runs the same 28/36 calculation instantly.)
Why calculate affordability before house hunting?
Most buyers start with listings and work backward to a budget. Flip that around. When you know your affordable price range first, every listing you view is a realistic option — no heartbreak over homes that were never in reach. You’ll also walk into lender conversations with confidence, spot when you’re being approved for more than you should borrow, and keep room in your budget for the costs beyond the mortgage itself, like maintenance, taxes, and insurance. In short, affordability is the foundation every other home-buying decision rests on.
What is the 28/36 rule?
The 28/36 rule is the lending guideline behind most conventional mortgage approvals in the United States. It sets two ceilings based on your gross monthly income (your pay before taxes and deductions):
- 28% — the front-end ratio: your total housing costs should not exceed 28% of gross monthly income. “Housing costs” means PITI: principal, interest, property taxes, and homeowner’s insurance.
- 36% — the back-end ratio: your total monthly debt payments, including the housing cost above plus car loans, student loans, minimum credit card payments, and similar obligations, should not exceed 36% of gross monthly income.
For example, on a $7,500 gross monthly income, the 28% rule caps housing at $2,100 per month, while the 36% rule caps all monthly debts at $2,700. These ratios have guided responsible lending for decades because they leave roughly two-thirds of your income for everything else — savings, food, transport, and life.
How to calculate mortgage affordability in 5 steps
Grab your latest pay stub and a list of your monthly debt payments. Here’s the exact process:
Step 1: Find your gross monthly income. Take your annual salary before taxes and divide by 12. A $100,000 salary becomes $8,333 per month. If your income varies, use a conservative 12-month average.
Step 2: Calculate your 28% housing cap. Multiply gross monthly income by 0.28. On $8,333, that’s $2,333 per month — the most you should spend on PITI.
Step 3: Calculate your 36% debt cap. Multiply gross monthly income by 0.36, then subtract your current monthly debt payments (car loans, student loans, credit card minimums). On $8,333 with $500 in debts: ($8,333 × 0.36) − $500 = $2,500 per month available for housing.
Step 4: Take the lower number. Your affordable monthly housing payment is the smaller of Step 2 and Step 3. Here, $2,333 beats $2,500, so $2,333 is your payment ceiling.
Step 5: Convert the payment into a home price. Using the standard mortgage formula with your interest rate and a 30-year term, convert that monthly payment into a loan amount, then add your down payment. This is the step where most people reach for a tool — our mortgage affordability calculator handles the conversion automatically.
Worked example: affordability on a $100,000 salary
Let’s run the full calculation for a buyer earning $100,000 per year, paying $500 per month in debts, with a $20,000 down payment and a 6.5% rate on a 30-year fixed loan:
- Gross monthly income: $100,000 ÷ 12 = $8,333
- 28% rule: $8,333 × 0.28 = $2,333/month max housing cost
- 36% rule: ($8,333 × 0.36) − $500 = $2,500/month max housing cost
- Affordable payment: $2,333/month (the lower figure)
- Loan this payment supports at 6.5%: ≈ $369,000
- Max home price: $369,000 + $20,000 down = ≈ $389,000
Notice how the 28% front-end rule is the binding constraint — the debts are modest enough that the 36% rule would allow more. If this buyer paid off a $300 monthly car loan, the 36% figure would rise but the 28% cap wouldn’t budge; conversely, a buyer with $1,200 in monthly debts would find the 36% rule binding instead. Run your own numbers through the mortgage affordability calculator to see which rule limits you.
What can raise or lower your affordable price?
Beyond the raw math, five levers move your number:
- Interest rates: a 1% lower rate can add tens of thousands to your buying power on a 30-year loan.
- Down payment: every extra dollar saved adds exactly one dollar to your max price — and hitting 20% avoids PMI.
- Existing debts: each $100 of monthly debt eliminated adds roughly $15,000 to your affordable price.
- Property taxes and insurance: remember, the 28% covers PITI, not just principal and interest — high-tax areas shrink what you can borrow.
- Loan program: FHA and other programs may allow higher ratios, but stretching beyond 28/36 leaves less margin for savings and surprises.
3 affordability mistakes to avoid
1. Using take-home pay instead of gross income. The 28/36 rule is defined on gross (pre-tax) income. Using net pay understates your budget and can confuse lender conversations.
2. Forgetting taxes and insurance. A $2,333 principal-and-interest payment can easily become $2,900+ with taxes and insurance. Always compare your PITI — not just P&I — against the 28% cap. Once you have an affordable price, use our mortgage payment calculator to sanity-check the monthly payment on any specific home.
3. Treating the approval as the budget. Lenders may approve you above 28/36, especially with strong credit. Approval is a ceiling a bank will risk — not a recommendation for your life. The 28/36 result is the comfort zone worth staying inside.
The bottom line
Calculating mortgage affordability comes down to two multiplications and an honest look at your debts. Find 28% of your gross monthly income, find 36% minus your debts, take the lower number, and convert it to a price. Do that before you fall in love with a listing, and you’ll shop with confidence instead of anxiety. Ready to run your numbers? Try the free mortgage affordability calculator — it takes under a minute and there’s no sign-up.