Your Budget Before the House Hunt

Falling in love with a house first and checking the budget second is the most expensive order of operations in personal finance. Lenders will happily approve you for the maximum — but “approved for” and “comfortable with” are different numbers, and the gap between them is where house-poor buyers live.

This free home affordability calculator uses the classic 28/36 rule lenders rely on: housing costs at or under 28% of your gross monthly income, and all monthly debts at or under 36%. Enter your income, debts, down payment, rate, and loan term, and you get your maximum affordable home price, the monthly payment behind it, which of the two rules is actually limiting you, and a suggested comfortable price range below the max — because the ceiling is not the target.

How to Use This Calculator

1. Enter your gross annual household income. Before taxes and deductions — combine incomes if buying with a partner.
2. Enter your total monthly debts. Car payments, student loans, credit-card minimums, personal loans — everything with a required monthly payment.
3. Enter your down payment. The cash you will put down; it adds directly to the price you can afford, dollar for dollar.
4. Set the interest rate and loan term. Higher rates shrink what you can afford; shorter terms raise the monthly payment for the same loan.
5. Click Calculate Affordability. Your max home price appears at the top, with both 28% and 36% caps, the loan behind the number, and your comfortable range below. Hover the "?" next to the 28/36 rule anytime for a refresher.

What Is the 28/36 Rule?

The 28/36 rule is the lending industry's long-standing guideline for how much house is safe, and it has two halves. The front-end ratio (28%) says your housing payment — principal, interest, taxes, and insurance — should not exceed 28% of your gross monthly income. The back-end ratio (36%) says your housing payment plus all other monthly debts should not exceed 36% of gross income.

The key insight this calculator surfaces: whichever cap is lower controls your budget. High earners with no debt are usually limited by the 28% rule; buyers carrying car and student-loan payments are usually limited by the 36% rule. Knowing which one binds tells you exactly what would raise your ceiling — a raise helps under the 28% rule, while paying off a car loan helps under the 36% rule.

Why gross income instead of take-home? Because lenders underwrite on gross — it is standardized and verifiable from pay stubs and tax returns. Just remember your actual budget also has taxes, retirement savings, and life in it, which is why the calculator shows a comfortable range below the maximum.

The Formula (With a Worked Example)

Worked example. $100,000 income, $500/month debts, $40,000 down, 6.5% rate, 30-year term:

1. Gross monthly: $100,000 ÷ 12 = $8,333.33
2. 28% cap: 0.28 × $8,333.33 = $2,333.33/month
3. 36% cap: 0.36 × $8,333.33 − $500 = $2,500/month
4. Binding rule: 28% housing rule ($2,333.33 is lower)
5. Monthly cost per $1 borrowed at 6.5% / 30 yrs = $0.006321; max loan = $2,333.33 ÷ 0.006321 = $369,159
6. Max home price: $369,159 + $40,000 = $409,159
7. Comfortable range (25% of income up to max): $369,600 – $409,200

Note the lesson in step 4: this buyer could pay off debts all day and it would not raise their ceiling one dollar — the 28% rule binds. A raise, or a bigger down payment, is what moves their number.

Tips for Using Your Number Wisely

• Shop in the comfortable range, not at the max. The max assumes nothing goes wrong. The comfortable range (around 25% of gross on housing) leaves room for rate resets, repairs, and life.
• Remember taxes and insurance ride on top. This calculator sizes the loan; lenders add property tax, homeowner's insurance, and any HOA or PMI to the monthly housing figure. In high-tax areas that can add several hundred dollars.
• Attack the binding rule. If the 36% rule limits you, every dollar of monthly debt you eliminate frees a dollar of housing budget. If the 28% rule limits you, focus on income and down payment.
• Bigger down, bigger price — linearly. Each extra $10,000 down raises your max price by exactly $10,000 and also shrinks the loan, which lowers the payment twice over.
• Re-run when rates move. A one-point rate change moves your max price by roughly 10%. What you could afford last year is not what you can afford today.
• Get pre-approved, then stay under it. Pre-approval tells sellers you are serious; discipline keeps you out of the house-poor trap. Let the approval be the ceiling and your comfortable range be the target.

Related Tools

Quick Estimate by Income (the 28% Rule)

The 28% rule gives a one-glance target: total housing costs — principal, interest, property taxes, and insurance — at or below 28% of gross monthly income.

The second half is the 36% back-end cap on housing plus all other debts. For most buyers, the 28% figure binds first — the calculator checks both caps.

Budget Beyond the Monthly Payment

An affordable monthly payment is not the whole cost of buying. Build these into your plan before you shop:

• Closing costs. Typically 2–5% of the purchase price — on a $300,000 home that is $6,000 to $15,000 in lender and title fees.
• Upkeep. A common planning rule is 1–2% of the home's value per year for maintenance and repairs.
• Moving and setup. Deposits, movers, and utility hookups land in the same month as your down payment.
• A leftover buffer. Buying at your absolute maximum leaves no cushion for the first surprise repair.