The affordability calculator answers the right question. Not "what can I technically get approved for" — lenders will approve you for much more than you should borrow — but "what max price keeps my total debts under 36% of gross income and my housing costs under 28%?" That is the 28/36 rule, and it is still the benchmark most underwriters use for conventional conforming loans.
Worked example: A household earning $9,000/month gross with $550/month in car and student loan payments can afford about $2,240/month in PITI under the 28% rule. At 7.0% on a 30-year fixed with 1.1% property tax and $1,400/year insurance, that supports a purchase price of roughly $385,000 with 20% down or $345,000 with 10% down (PMI eats into the budget).
The 28/36 rule, exactly
There are two thresholds, called the front-end and back-end ratios:
- Front-end (28%) — total housing cost (PITI + HOA) divided by gross monthly income. Keep this under 28%.
- Back-end (36%) — housing cost plus all other minimum debt payments (car, credit card minimum, student loan, personal loan, child support) divided by gross monthly income. Keep this under 36%.
Conventional loans through Fannie Mae and Freddie Mac allow back-end ratios up to 45% (sometimes 50% with strong compensating factors). FHA allows up to 57% in some cases. VA has no hard cap but uses residual income. Just because you can push the ratio higher does not mean you should. The 28/36 rule was designed when household savings rates were higher and childcare, healthcare, and car costs were lower. Today, many households max out at 30% front-end and feel the pinch hard.
Why 'pre-approval amount' is bigger than 'what you can afford'
Lenders look at gross income and minimum debt payments. They do not look at:
- Your 401(k) contributions, which come out pre-tax but are real cash off your take-home
- Your health insurance, HSA, and other payroll deductions
- Childcare, which can be $1,500-$2,500/month per kid in major metros
- Food, utilities, and transportation — none of which are on your credit report
- Your retirement or college savings goals
A dual-income couple pulling $14,000/month gross can get pre-approved for a $780,000 home at 45% back-end DTI. Whether they should buy at $780,000 is a different question. If you want to keep saving 15% toward retirement and have two kids in daycare, the real ceiling is closer to $600,000.
Three household profiles
Single earner, no dependents, $85,000/year: Gross $7,083/mo. With $400 in car + student loan minimums, back-end budget is $2,150 total debts. Housing budget (under back-end cap) is $1,750/mo. At 7.0% / 30-year / 1.0% tax / $1,200 insurance / 15% down, that supports a $275,000 home.
Dual income, 2 kids, $160,000/year: Gross $13,333/mo. Minimum debts $850 (two car payments). Back-end ceiling $4,950, so housing cap is $4,100. At 6.875% / 20% down / 1.25% tax / $1,500 insurance, that supports a $625,000 home — but if they contribute 10% to 401(k) and pay $2,200/month childcare, the realistic ceiling drops to about $475,000.
Self-employed, $140,000 net / $175,000 gross: Lenders use two-year average AGI for self-employed borrowers. Effective qualifying income is often 20-30% lower than gross because of write-offs. Plan on the $140K number, not the $175K.
Factors that change your number materially
- Down payment size. Larger down = lower loan = lower P&I + no PMI. Going from 10% to 20% down on a $400K home drops PITI by about $285/mo.
- Rate. Every 0.5% rate change moves your max price by about 5-6%.
- Property tax rate. A 1.0% vs 2.2% tax rate difference on a $400K home is $400/mo — enough to cut your max price by $60,000.
- Student loans. In 2024 FHA switched to requiring 0.5% of balance (not actual payment) as the qualifying payment. A $60K student loan balance counts as a $300 debt, even if your income-driven plan is $0.
- Credit score tier. Scores under 740 pay loan-level price adjustments that raise your rate 0.125-0.5%. Pull free scores from our pre-approval quiz before you shop.