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C.02 · Housing

What house can you actually afford?

Lenders will often approve you for as much as 43% of your pre-tax income going to debt. A comfortable budget usually sits well below that. We show all three — cautious, typical, stretched — so you can see where the math gets uncomfortable.

Debt-to-income limits
28/36 · 30/43 · 35/50
Housing share / total-debt share of pre-tax income
Inputs
Annual income (before taxes)
$85,000
Monthly debt paymentsCars, student loans, credit cards
$400
Down payment (% of home price)
20.00%
Interest rate
6.48%
Most home you could buy · moderate budget
$421,123
The two numbers are caps on the share of your pre-tax (gross) monthly income that can go to (1) your housing payment and (2) all your debts combined. Lower = safer.
Estimated monthly payment (loan principal & interest only): $2,125
This does not include property tax, home insurance, or PMI, which raise your real monthly cost.
What you still owe, year by year
Based on a 30-year loan at the moderate budget's top price
$0$167K$333KYear 0Year 15Year 30Interest-heavyEquity builds faster
Year-by-year breakdown

How your payments add up · Typical budget

How this loan gets paid down over 30 years. Each year, part of your payment chips away at the loan (principal) and part is interest — this shows the split. Pick a different budget above to see how the numbers change.

Year
Principal
Interest
Balance
Progress
1
$3,780
$21,720
$333,118
1%
2
$4,032
$21,468
$329,086
2%
3
$4,301
$21,199
$324,785
4%
4
$4,589
$20,911
$320,196
5%
5
$4,895
$20,605
$315,301
6%
6
$5,222
$20,278
$310,080
8%
7
$5,570
$19,930
$304,509
10%
8
$5,942
$19,558
$298,567
11%
9
$6,339
$19,161
$292,228
13%
10
$6,762
$18,738
$285,466
15%
11
$7,214
$18,286
$278,252
17%
12
$7,695
$17,805
$270,557
20%
13
$8,209
$17,291
$262,349
22%
14
$8,757
$16,743
$253,592
25%
15
$9,341
$16,159
$244,250
28%
16
$9,965
$15,535
$234,285
30%
17
$10,630
$14,870
$223,655
34%
18
$11,340
$14,160
$212,315
37%
19
$12,097
$13,403
$200,218
41%
20
$12,905
$12,595
$187,313
44%
21
$13,766
$11,734
$173,547
48%
22
$14,685
$10,815
$158,862
53%
23
$15,666
$9,834
$143,196
57%
24
$16,711
$8,789
$126,485
62%
25
$17,827
$7,673
$108,658
68%
26
$19,017
$6,483
$89,641
73%
27
$20,287
$5,213
$69,354
79%
28
$21,641
$3,859
$47,713
86%
29
$23,086
$2,414
$24,627
93%
30
$24,627
$873
$0
100%
How we compute this

Why three numbers, not one.

It comes down to two ratios: your housing cost divided by your pre-tax income (the 'housing ratio'), and all your debt divided by your pre-tax income (the 'total-debt ratio'). Different lenders and risk tolerances use different caps.

max monthly housing payment = the smaller of: (monthly pre-tax income × housing-ratio) or (monthly pre-tax income × total-debt-ratio − your current monthly debt payments)

Cautious uses 28/36 (the classic rule). Typical uses 30/43 (most conventional lenders). Stretched uses 35/50 — the limits some government-backed (FHA) loans and certain banks will allow. We find the biggest loan that fits each monthly limit at your rate, then work out the home price that down payment supports.

Next up

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Frequently Asked Questions

The 28/36 rule says your monthly housing costs should not exceed 28% of your gross (pre-tax) income -- your housing share, a.k.a. the front-end ratio -- and total debt should not exceed 36% -- your total-debt share, or back-end ratio. This is the cautious standard most financial advisors recommend.