The 28/36 Rule
Lenders use the 28/36 rule to determine how much you can borrow. Your monthly housing costs (PITI) should not exceed 28% of gross monthly income, and total debt payments should not exceed 36%. This calculator uses the more conservative of the two limits.
Max Housing = Monthly Income x 28%
Max Total Debt = Monthly Income x 36%
Max Loan = Max Housing Payment / Monthly Rate Factor
Frequently Asked Questions
Conventional loans require as little as 3-5% down, but less than 20% means paying PMI. FHA loans require 3.5% down. A larger down payment lowers your monthly payment, eliminates PMI, and reduces total interest.
This calculator uses the 28% housing ratio which should include PITI — principal, interest, taxes, and insurance. If your property taxes and insurance are high, your actual purchase price limit will be lower than shown.