The rule lenders actually use
Forget "three times your salary" — that guideline was invented when mortgage rates were completely different, and it ignores your debts, your taxes and the rate you'd actually pay. Lenders use two ratios instead:
- Front-end ratio (28%) — total housing cost (principal, interest, taxes, insurance) must stay under 28% of gross monthly income.
- Back-end ratio (36%) — that housing cost plus every other debt payment must stay under 36%.
Whichever ceiling you hit first is your true limit — and this calculator tells you which one it was, because that tells you what to fix.
A worked example
On a $110,000 household income with $600 of other monthly debt:
- Gross monthly income: $9,167
- 28% housing ceiling: $2,567
- 36% total-debt ceiling: $3,300 − $600 = $2,700
- The lower one wins: $2,567 a month for housing
Then taxes and insurance come out of that budget before anything reaches the loan. At $4,200 tax and $1,500 insurance a year, that's $475 a month gone — leaving about $2,092 for principal and interest, which is the figure the loan amount is derived from.
Why clearing a car loan is such a powerful move: that $600 payment costs you roughly $600 of monthly borrowing power. At 6.5% over 30 years, that's about $95,000 less house. Paying off a car before applying can do more for your approval than a year of saving.
Approved isn't the same as affordable
Here's the part lenders have no reason to tell you: their ratios say nothing about the life you want to live in that house. They don't count childcare, retirement contributions, travel, hobbies, or the roof that will eventually need replacing.
Being "house poor" — technically able to pay the mortgage while everything else feels impossible — is a real and common outcome of borrowing right at the ceiling. Treat the number above as the maximum the system permits, then decide separately what you actually want to spend.
How to raise the ceiling honestly
- Clear a debt — the fastest lever, as shown above.
- Save a bigger down payment — more house for the same loan, and past 20% it removes PMI.
- Improve your credit score — a better rate buys real purchasing power.
- Look at cheaper tax areas — property tax varies enormously by county and comes straight out of your budget.
Once you've got a target price, run it through the mortgage calculator to see the full monthly payment including PMI — and use the savings goal calculator to work out what the down payment demands of you each month.
Frequently asked questions
What is the 28/36 rule?
It is the standard lender guideline. Your total housing cost — principal, interest, taxes and insurance — should stay under 28% of gross monthly income, and all your debt payments combined should stay under 36%. Whichever limit is reached first sets your maximum loan.
How much house can I afford on my salary?
It depends on far more than salary: your existing debts, the interest rate, your down payment and local property taxes all move the answer significantly. Enter your own numbers above rather than trusting a rule of thumb like 'three times income', which ignores rates entirely.
Do lenders count my gross or net income?
Gross — your income before tax. That is one reason the maximum a lender approves can feel uncomfortable in practice: your actual take-home pay is considerably lower than the figure the ratio is based on.
Does paying off a car loan help me get a bigger mortgage?
Often dramatically. A $500 monthly car payment consumes $500 of your 36% debt allowance, which can reduce your borrowing power by roughly $70,000–90,000 at typical rates. Set the debts field to zero above to see the difference for your numbers.
Should I borrow the maximum I am approved for?
Usually not. Lender ratios do not account for childcare, retirement contributions, home maintenance, or any desire to save. Many people intentionally buy at 60–80% of their approved maximum so the house does not consume everything else.