The 28/36 Rule Explained
Mortgage underwriters assess home pre-approval using Debt-to-Income (DTI) ratios:
- 28% Front-End DTI: Your monthly housing payment (PITI: Principal, Interest, Taxes, Insurance) should not exceed 28% of gross monthly income.
- 36% Back-End DTI: Your total monthly debt obligations (PITI + student loans + car loans + credit cards) should not exceed 36% of gross monthly income.
Factoring Closing Costs & Cash Reserves
Remember that closing costs (lender fees, title insurance, appraisal) require an extra 2% to 5% of the purchase price in cash on top of your down payment.
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