How Lenders Calculate Affordability
Most lenders use the 28/36 rule: your total housing payment (principal, interest, taxes, insurance) shouldn't exceed 28% of your gross monthly income, and your total debt payments (including housing) shouldn't exceed 36%.
Why Both Numbers Matter
If you have significant existing debt — car loans, student loans, credit cards — the 36% total debt limit often becomes the binding constraint, reducing your home-buying budget below what the 28% housing-only rule would suggest.
Frequently Asked Questions
The 28/36 rule suggests spending no more than 28% of gross monthly income on housing costs, and no more than 36% on total debt including housing — a standard guideline used by most mortgage lenders.
Using the 28% rule, $85,000/year ($7,083/month gross) supports a housing payment of about $1,983/month. Depending on rate, taxes, insurance, and down payment, this typically supports a home price in the $280,000-$340,000 range.
Yes — lenders use PITI (Principal, Interest, Taxes, Insurance) as the full housing payment when calculating affordability, since all four are required monthly obligations.