How Much House Can I Afford? The 28/36 Mortgage DTI Rule Explained
Calculate your maximum home buying budget using Fannie Mae 28/36 debt-to-income underwriting guidelines, down payment sizes, and interest rate impacts.
How Much House Can I Afford? The 28/36 Mortgage DTI Rule Explained
Determining your true home buying power requires more than browsing listings—it requires understanding how mortgage underwriters evaluate your gross income against existing debt obligations using Debt-to-Income (DTI) ratios.
This guide explains the standard 28/36 Rule, how interest rates and down payments dictate maximum purchase price, and connects to the CalculatorAll Home Affordability Calculator.
What is the 28/36 Rule?
Conforming mortgage lenders (Fannie Mae and Freddie Mac) prefer your finances to satisfy two benchmarks:
- Front-End Ratio (28%): Your total monthly housing expense (PITI: Principal, Interest, Property Taxes, Homeowners Insurance, HOA fees) should not exceed 28% of your gross monthly income.
- Back-End Ratio (36%): Your total monthly debt obligations (Housing PITI + car payments, student loans, minimum credit card payments) should not exceed 36% of your gross monthly income.
Worked Example: $95,000 Annual Household Income
Suppose your household earns $95,000 per year ($7,917/month) and pays $500/month in existing debts (auto loan + student loan):
- Calculate Front-End Max (28%):
$7,917 × 0.28 = $2,217/month. - Calculate Back-End Max (36%):
($7,917 × 0.36) - $500 = $2,850 - $500 = $2,350/month. - Allowable Monthly Housing Payment: The lower of the two limits applies: $2,217/month.
- Loan Amount Supported (at 6.5% interest on 30-year fixed, assuming 1.5% tax/insurance): ~$358,000.
- Add $40,000 Down Payment: Maximum qualifying home price is ~$398,000.
How Interest Rates Impact Purchasing Power
Because mortgage payments are amortized over 30 years, small changes in interest rates drastically alter purchasing power:
| Mortgage Interest Rate | Monthly P&I Payment ($350k Loan) | Required Annual Income (at 28% DTI) |
|---|---|---|
| 5.0% | $1,879 / mo | $80,500 / year |
| 6.5% | $2,212 / mo | $94,800 / year |
| 8.0% | $2,568 / mo | $110,000 / year |
Every 1% increase in mortgage rates reduces home purchasing power by approximately 10% to 11% for the identical monthly payment.
Try the numbers with our calculator
Use your own assumptions instead of relying on a generic example.
Calculate Your Home Affordability
