Mortgage affordability (DTI-based)

What you can actually afford (not what the lender approves)

Most online mortgage calculators ask for income and spit out a loan amount using a single percent-of-income shortcut. Real lenders look at debt-to-income ratios — a front-end ratio that caps housing costs and a back-end ratio that caps total monthly debt. They also look at property taxes, insurance, HOA, and mortgage insurance (PMI) as part of the housing number. This calculator walks the same path a real underwriter walks.

The 28/36 rule, in detail

Front-end ratio (28%): monthly housing payment (PITI) divided by gross monthly income. Should not exceed 28% for conservative conventional loans.

Back-end ratio (36%): all monthly debt payments (PITI + car + student loans + minimum credit card + child support + alimony) divided by gross monthly income. Should not exceed 36% for conservative loans.

These ratios are a lending industry baseline, but they're not uniform. Different loan programs allow different caps:

• FHA — 31% front-end, 43% back-end (can go higher with compensating factors).
• VA — no strict front-end, 41% back-end.
• Conventional (Fannie/Freddie) — up to 50% back-end for strong borrowers with high reserves and credit scores.
• Non-QM — various, often 45–50%.

What counts as monthly income

Lenders use "qualifying income" — not just your paycheck:

• W-2 base salary + consistent overtime averaged over 2 years
• Bonus and commission income averaged over 2 years
• Self-employment income from tax returns (2 years, averaged with trending rules)
• Rental income (75% of gross rent to account for vacancy and maintenance)
• Investment dividends, child support, alimony (with documentation)

Self-employed buyers often qualify for less than their accountant reports because tax-advantaged deductions reduce qualifying income. Most people over-estimate what they can show a lender.

What counts as debt

• Car loans and leases (not gas or insurance)
• Student loans (even if deferred — lenders use 1% of balance or the actual payment)
• Credit card minimum payments (even if you pay in full monthly)
• Personal loan payments
• Child support and alimony obligations
• Cosigned debts (you're on the hook in the lender's eyes)

Notably not counted: rent, utilities, groceries, medical expenses, contributions to retirement. Once you buy, the mortgage replaces the rent line but all the other non-debt expenses continue.

The down payment trade-off

Higher down payment = smaller loan = lower monthly payment = more affordability. But every dollar used for down payment is a dollar not in savings or investment accounts. The standard thresholds that matter:

• 20% down — avoids PMI on conventional loans. Below 20%, add $100–$300/month PMI until you pay down to 78% LTV.
• 3.5% down — FHA minimum.
• 0% down — VA (if eligible), USDA (rural).

Beyond the 28/36: what to budget for

Homeowners spend 1–4% of the home value annually on maintenance and repairs that the 28/36 rule doesn't capture. Add 0.5–1% for utilities that are typically higher than rentals (bigger square footage, no landlord covering water/sewer/trash). The "true cost of ownership" is usually 30–40% above the PITI the lender cares about.

Our recommendation

Use the lender-approved PITI as a ceiling, not a target. Aim to come in well below it — 22–25% front-end, 30% total debt — so that your actual monthly housing cost leaves room for emergencies, retirement contributions, and the inevitable surprise of maintenance.