How Much House Can I Afford? US Mortgage Guide 2026

The 28/36 rule explained simply

The 28/36 rule is a widely used guideline in US mortgage lending that helps estimate how much home you can afford based on your gross income and existing debts. The first number—28—refers to the front-end debt-to-income ratio: your housing costs should not exceed 28% of your gross monthly income. The second number—36—refers to the back-end ratio: your total monthly debt payments including housing should not exceed 36% of your gross monthly income.

These percentages originate from conventional mortgage underwriting guidelines, though they are not hard rules. FHA loans, VA loans, and jumbo mortgages may allow higher ratios with compensating factors such as strong credit scores or substantial reserves. Think of the 28/36 rule as a starting framework rather than a strict ceiling.

How to calculate your front-end DTI ratio

Your front-end DTI ratio measures housing costs relative to your gross monthly income. To calculate it, add up all your housing expenses including principal, interest, property taxes, homeowners insurance, and any HOA fees. Divide that total by your gross monthly income—the amount before taxes and other deductions.

For example, if your gross monthly income is $7,500 and your total housing costs are $2,100, your front-end DTI would be 28%. The calculation: $2,100 divided by $7,500 equals 0.28 or 28%. Lenders generally prefer your front-end ratio to stay at or below 28% for conventional loan approval, though many lenders will consider slightly higher ratios with strong compensating factors.

How to calculate your back-end DTI ratio

Your back-end DTI ratio includes all monthly debt payments—not just housing. This encompasses your mortgage payment, auto loans, student loans, credit card minimum payments, personal loans, and any other recurring debt obligations. Child support and alimony also count.

The calculation follows the same structure as front-end: total monthly debt payments divided by gross monthly income. If your gross monthly income is $7,500 and your combined debt payments (mortgage plus $400 car payment plus $300 student loan plus $200 credit card minimums) equal $1,800, your back-end DTI would be 24%. Most conventional lenders prefer back-end ratios at or below 36%, though some programs allow higher with conditions.

What counts as housing costs (PITI)

When lenders assess your front-end ratio, they typically use PITI as the housing cost measure. PITI stands for Principal, Interest, Taxes, and Insurance—the four main components of a monthly mortgage payment.

Principal is the portion of your payment that reduces your loan balance. Interest is the cost of borrowing the money. Property taxes are typically collected by your lender and held in an escrow account, then paid annually or semi-annually to your local government. Homeowners insurance protects both you and the lender against property damage or loss. Some calculations also include PMI (private mortgage insurance) if your down payment is below 20%.

Worked example 1: $75,000 salary with existing debts

Consider an individual earning $75,000 per year, which translates to approximately $6,250 gross monthly income. They have existing debts of $500 per month (a car payment and student loan).

With a 28% front-end cap, their maximum housing payment would be $6,250 times 0.28 equals $1,750 per month. With a 36% back-end cap, their total debt including housing must stay below $6,250 times 0.36 equals $2,250 per month. Since they already have $500 in existing debts, their remaining back-end allowance for housing is $2,250 minus $500 equals $1,750—matching the front-end cap in this case.

At $1,750 per month for PITI, and assuming property taxes and insurance add approximately $350 per month, they would have about $1,400 for principal and interest. Using current typical rates, this might support a loan amount in the $200,000 to $250,000 range depending on property taxes and insurance in their target area. Use our US mortgage calculator to model your specific income and debt situation.

Worked example 2: $120,000 household income with substantial debts

Consider a household earning $120,000 per year ($10,000 gross monthly income) with existing monthly debt payments of $1,200 including car loans, student loans, and credit card minimums.

The front-end cap allows housing costs up to $10,000 times 0.28 equals $2,800 per month. The back-end cap allows total debts up to $10,000 times 0.36 equals $3,600 per month. With $1,200 in existing debts, they have $3,600 minus $1,200 equals $2,400 available for housing.

In this scenario, the back-end ratio is the binding constraint—their housing budget of $2,400 is lower than the $2,800 front-end cap. At $2,400 for PITI, and estimating $400 for taxes and insurance, they would have $2,000 available for principal and interest. This might support a larger loan amount than the previous example, though their actual approved amount could vary based on credit scores, down payment, and lender overlays.

How credit scores affect how much you can borrow

Your credit score significantly influences both the maximum loan amount you can access and the interest rate you will pay. Higher credit scores typically qualify for larger loan amounts because lenders view them as lower risk. Scores above 740 often receive the most favourable rates and maximum program amounts.

Lower credit scores may result in higher interest rates, which affects your monthly payment calculation. A higher rate means more of your payment goes to interest rather than principal, potentially requiring a smaller loan to stay within your DTI limits. Some loan programs such as FHA have more flexible credit requirements, but they may also include additional costs like upfront and monthly mortgage insurance premiums.

Down payment impact: 3% vs 10% vs 20%

Your down payment directly affects how much house you can afford in several ways. A larger down payment means a smaller loan, which translates to lower monthly payments and potentially a lower interest rate. Down payments of 20% or more typically eliminate the need for private mortgage insurance (PMI), which can add $100 to $300 or more to your monthly payment.

With a 3% down payment (common for first-time buyer programs), you would need a larger loan and pay PMI, increasing your monthly housing costs. A 10% down payment reduces the loan amount and may still require PMI depending on your credit and loan type. A 20% down payment eliminates PMI but requires more cash upfront. Our US mortgage calculator lets you compare these scenarios to find the down payment level that fits your budget.

Related calculators and guides

For a complete picture of what you can afford in the US, use our free US mortgage calculator to model your income, debts, and down payment options. To understand the foundational DTI ratios better, read our detailed guide explaining the 28/36 rule for US mortgages.