Start with gross income, then subtract debts
Gross income is the figure before taxes. The 28% line is that income divided by 12, times 0.28. The 36% line subtracts car, card, student, and other debts you already pay.
If debts use up the 36% room, the estimated home price falls even when income looks high. The calculator names which rule was tighter.
Taxes, insurance, and PMI spend the payment too
The housing payment is not all principal and interest. A tax rate and an insurance estimate take part of it, and PMI takes more when the down payment is under 20%.
The resulting price is an educational ceiling. Credit, reserves, and the loan program can move the real number.
| Rule | Formula |
|---|---|
| Front-end | Income × 28% |
| Back-end | Income × 36% minus current debts |
Calculators
Related guides
Sources
Common questions
Is this a pre-approval?
No. A pre-approval is a lender's review of your documents. This is arithmetic.
Should I use take-home pay?
The 28/36 guideline uses gross income. Take-home pay is a separate budget check, covered in its own guide.