You enter gross annual income, existing monthly debts, down payment savings, an expected interest rate, and loan term. The tool divides income by 12, applies the 28% and 36% thresholds, subtracts existing debts from the 36% cap, then takes the lower payment limit. It reverse-solves the standard amortization formula to find the mortgage that produces that payment, and adds your down payment for the total home price. It assumes a fixed-rate, fully-amortizing loan and does not include taxes, insurance, PMI, or HOA.
It's a guideline most conventional lenders follow. Your monthly housing costs (principal, interest, taxes, insurance) should not exceed 28% of gross monthly income, and your total monthly debt payments should not exceed 36%. Some loan programs allow higher ratios — FHA goes up to 31/43 in many cases.
No. This calculator shows principal and interest only. Budget an additional 1–2% of home value per year for property taxes and $1,200–$2,500 per year for homeowners insurance. If your down payment is under 20%, add PMI as well.
Use gross (pre-tax) income. Lenders base the 28/36 rule on gross income, not take-home pay. However, for personal budgeting, many advisors recommend keeping housing under 25–30% of net income to leave room for savings and other expenses.
Include minimum payments on car loans, student loans, credit cards, personal loans, child support, and alimony. Do not include utilities, subscriptions, or groceries — lenders only count obligations that appear on your credit report.
The maximum is a ceiling, not a recommendation. Most financial advisors suggest buying well below your maximum to leave room for maintenance, savings, and lifestyle. A common guideline is a home price of 3–4 times your annual income.
Estimate only. Results reflect your inputs and standard formulas. Double-check important decisions independently.