How lenders decide what you can borrow
Mortgage affordability comes down to two debt-to-income ratios, together called the 28/36 rule. Your total housing payment — principal, interest, property taxes and insurance (PITI) — should stay at or under 28% of gross monthly income (the "front-end" ratio). And all your debt payments combined, housing included, should stay under 36% (the "back-end" ratio). This calculator applies both and uses the lower ceiling, then works backward to a maximum home price.
A worked example
On $90,000 income ($7,500/month), 28% gives a $2,100 housing budget. With $400 of existing debt, the 36% rule allows $2,300 for housing — so the 28% rule binds at $2,100. Subtract ~$450 of taxes and insurance, leaving ~$1,650 for principal and interest. At 6.5% over 30 years that supports about a $261,000 loan; add a $60,000 down payment and you can afford roughly a $321,000 home.
What "can afford" really means
- Borrowing max ≠ spending max. Lenders will often approve you at the top of these ratios; that doesn't mean you should buy there. Leaving room below the ceiling protects you from becoming "house-poor."
- Down payment matters twice. It raises the price you can afford and, at 20%+, avoids private mortgage insurance (PMI) — see the down payment calculator.
- Rate sensitivity is real. A one-point rate rise can cut your affordable price by tens of thousands, because it shrinks the loan a given payment supports.
Beyond the ratios
The 28/36 rule ignores your actual life — childcare, irregular income, savings goals, or a long commute all argue for buying below the maximum. Treat the result as a ceiling set by lenders, then subtract a personal safety margin sized to your circumstances. Pair it with the full mortgage calculator to see the real monthly payment, and read how much house you can afford for the deeper discussion.