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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
6.49%
Most home you could buy · moderate budget
$420,685
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$166K$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
$3,769
$21,731
$332,779
1%
2
$4,021
$21,479
$328,758
2%
3
$4,290
$21,210
$324,469
4%
4
$4,577
$20,923
$319,892
5%
5
$4,883
$20,617
$315,010
6%
6
$5,209
$20,291
$309,801
8%
7
$5,557
$19,943
$304,243
10%
8
$5,929
$19,571
$298,314
11%
9
$6,325
$19,175
$291,989
13%
10
$6,748
$18,752
$285,241
15%
11
$7,200
$18,300
$278,041
17%
12
$7,681
$17,819
$270,360
20%
13
$8,195
$17,305
$262,166
22%
14
$8,742
$16,758
$253,423
25%
15
$9,327
$16,173
$244,096
27%
16
$9,951
$15,549
$234,146
30%
17
$10,616
$14,884
$223,530
34%
18
$11,326
$14,174
$212,204
37%
19
$12,083
$13,417
$200,121
41%
20
$12,891
$12,609
$187,229
44%
21
$13,753
$11,747
$173,476
48%
22
$14,673
$10,827
$158,804
53%
23
$15,654
$9,846
$143,150
57%
24
$16,701
$8,799
$126,449
62%
25
$17,817
$7,683
$108,632
68%
26
$19,009
$6,491
$89,623
73%
27
$20,280
$5,220
$69,344
79%
28
$21,636
$3,864
$47,708
86%
29
$23,082
$2,418
$24,626
93%
30
$24,626
$874
$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.