Mortgage Affordability Guide: How Much House Can You Realistically Afford?
Understand lender underwriting DTI rules (28/36 rule), gross monthly income limits, and how existing debts dictate maximum home purchasing power.
By Sarah Jenkins, CFA
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Reviewed by David Vance, CFP
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5 min read
The 28/36 Rule of Mortgage Affordability
Mortgage lenders evaluate home purchasing power using two standard Debt-to-Income (DTI) caps:
- Front-End DTI (28% Rule): Total monthly housing expenses (P&I + taxes + insurance) should not exceed 28% of gross monthly income.
- Back-End DTI (36% Rule): Total monthly obligations (housing expenses + student loans + car payments + credit cards) should not exceed 36% of gross monthly income.
Impact of Down Payments on Purchasing Power
Every extra $10,000 added to your down payment directly reduces your required loan principal, lowering your monthly P&I obligation and expanding your maximum home price capacity under fixed DTI underwriting caps.