Most lenders use your debt-to-income ratio to decide how much house you can afford — and many follow the 28/36 guideline: keep your total housing payment under 28% of your gross monthly income, and all your monthly debts combined under 36%. But the number a lender approves and the number that fits your life are not always the same. This guide shows you how to find yours.
The 28/36 rule, in plain numbers
Work through it with a household income of $6,000 per month:
Now the catch: that $1,680 must cover more than principal and interest. It also includes property taxes, homeowners insurance, and — if your down payment is under 20% on a conventional loan — mortgage insurance, plus any HOA dues. On many homes, taxes and insurance alone consume $300–$600 of that budget.
The costs nobody tells you to add
Buyers who budget only the mortgage payment are surprised every time. Build these in before you set your price range:
| Cost | Typical range | How to estimate it |
|---|---|---|
| Property taxes | Varies widely by county | Look up the specific home's tax history — rates differ dramatically between neighboring towns |
| Homeowners insurance | Often $100–$250/mo | Get a real quote on the address; older roofs and wildfire-region homes cost more |
| Mortgage insurance | Required under 20% down (conventional) or on all FHA loans | Ask each lender to quote it in dollars, not just "included" |
| HOA dues | $0–$500+/mo | Non-negotiable and they can rise — factor the current number in full |
| Maintenance | Commonly estimated at 1–3% of home value per year | Older home or older roof? Budget the high end |
| Utilities | Often $200–$400/mo | Ask the seller for 12 months of bills — a big drafty house costs real money to heat |
Pre-approval is a ceiling, not a target
Some loan programs approve borrowers with total debt ratios well above 36%. That does not mean the higher payment is comfortable — it means the lender considers the risk acceptable. Buyers are often happiest setting their search limit 10–15% below their approved amount, which leaves room for savings, repairs, and life.
Also remember: your down payment affects the monthly number twice. More down means a smaller loan and, at 20% down on a conventional loan, no private mortgage insurance at all.
Want a real number instead of a rule of thumb?
The fastest way to know your true price range is a pre-approval from a lender who quotes your payment in dollars — principal, interest, taxes, insurance, and mortgage insurance together. Comparing two or three pre-approvals also shows you how much rates and fees vary between lenders for the same buyer.
A six-line worksheet before you shop
- Write your gross monthly household income.
- Multiply by 0.28 — that is your housing ceiling.
- List every current monthly debt payment.
- Add the two; if the total passes 36% of income, lower the housing target until it fits.
- Subtract realistic taxes, insurance, and HOA for your target area from the housing number — what remains is your actual principal-and-interest budget.
- Keep an emergency fund untouched. The payment you can afford is the one you can still pay after a furnace dies.
Once the math works on paper, the rest of the buying process has a clear starting point — our first-home checklist walks through it step by step, and our FHA vs conventional comparison helps you pick the loan type that fits the numbers you just calculated.