US Mortgage
Affordability Calculator

The 28/36 rule is the most widely used affordability guideline in US mortgage lending. It sets two limits on how much of your gross (pre-tax) monthly income should go toward debt:

• Front-end ratio (28%): Your total housing costs — mortgage principal and interest, property taxes, homeowner insurance, HOA fees and PMI — should not exceed 28% of your gross monthly income.
• Back-end ratio (36%): Your total monthly debt payments — housing costs plus car loans, student loans, credit card minimums and any other recurring debts — should not exceed 36% of gross monthly income.

This calculator uses the 28% front-end ratio to determine the maximum monthly mortgage payment you can afford, then uses a standard 30-year amortization formula to convert that into a maximum loan amount. Adding your down payment gives the total home price you can target.

Some lenders, particularly for FHA loans, will accept higher ratios — up to 31% front-end and 43% back-end. However, staying within 28/36 provides a comfortable buffer and is the standard most conventional lenders apply.

Federal Housing Administration (FHA) loans are government-backed mortgages designed to make homeownership more accessible, especially for first-time buyers:

• Minimum down payment: Just 3.5% of the purchase price with a credit score of 580 or above. With a score of 500-579, you will need 10% down.
• Mortgage insurance: FHA loans require both an upfront mortgage insurance premium (1.75% of the loan) and annual MIP (0.55-1.05% depending on LTV and term). Unlike PMI on conventional loans, FHA MIP typically lasts the life of the loan.
• Loan limits: FHA sets maximum loan amounts by county. In 2025, the floor is $498,257 and the ceiling in high-cost areas is $1,149,825.
• DTI flexibility: FHA allows up to 31% front-end and 43% back-end DTI, and in some cases even higher with compensating factors like cash reserves or a strong employment history.

If you are considering an FHA loan, adjust the down payment in the calculator to reflect 3.5% of your target price and factor in the additional mortgage insurance costs when budgeting.

Putting 20% down on a conventional mortgage is often cited as the gold standard. Here is why:

• No PMI: Private Mortgage Insurance is required on conventional loans with less than 20% down. PMI typically costs 0.5-1.5% of the loan amount per year, adding $100-$300+ to your monthly payment on a $300,000 loan.
• Lower monthly payments: A larger down payment means a smaller loan, which directly reduces your monthly payment and total interest paid over the life of the mortgage.
• Better interest rates: Lenders view borrowers with 20%+ down as lower risk, often offering rates 0.25-0.5% lower than those with 5-10% down.
• Stronger offers: In competitive housing markets, sellers prefer buyers with larger down payments as they are less likely to have financing fall through.
• Instant equity: You start with 20% equity in your home from day one, providing a cushion against market downturns.

That said, waiting years to save 20% is not always practical — especially in rising markets. Many buyers successfully purchase with 5-10% down and refinance later to drop PMI once they hit 20% equity.

Your mortgage payment is only part of the total cost of homeownership. Budget for these additional expenses:

• Property taxes: Typically 0.5-2.5% of assessed value per year, varying by state and county. Texas, New Jersey and Illinois have among the highest rates.
• Homeowner insurance: Average $1,500-$2,500/year nationally, but significantly higher in disaster-prone areas (Florida, Louisiana, California).
• PMI: 0.5-1.5% of the loan per year if your down payment is under 20%. This can be cancelled once you reach 20% equity.
• Closing costs: Budget 2-5% of the purchase price. Includes lender fees, appraisal, title insurance, attorney fees and prepaid taxes/insurance.
• Maintenance: The 1% rule suggests budgeting 1% of the home value per year for upkeep — $3,000/year on a $300,000 home.
• HOA fees: If applicable, $200-$500+/month for condos and planned communities.

As a rule of thumb, your true monthly cost of homeownership will be 30-50% higher than the mortgage payment alone. Use the calculator above as a starting point, then factor in these extras when setting your budget.