Start with gross income, then subtract debts
Gross income is the number before taxes come out. Take it, divide by 12, and 28% of that is the housing line people quote. The 36% line is less famous and usually more important: it counts the car, the cards, and the student loans you already pay.
Two people with the same salary can land on different houses. If those other debts eat the 36% room, the estimated price drops even when the income still looks fine on paper. The calculator says which rule ran out first. That label is the useful part.
Taxes, insurance, and PMI spend the payment too
A housing payment is not a blank check for principal and interest. Property tax and insurance take a share before the loan is even priced, and PMI takes another share when the down payment is under 20%. Ignore those and the house you 'can afford' is a fiction.
What you get back is a ceiling for planning, not a yes from a lender. Credit, cash left after closing, and the loan program can all move the real number. If the ceiling surprises you, change the debts and the tax rate before you change your mind about the house.
| 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.