House Affordability Calculator: 28/36 Solvency Model (2026)
Calculate exactly how much house you can afford using 2026 lender standards. Factor in DTI ratios, property taxes, and the 2026 mortgage stress test.
Understanding the 28/36 Underwriting Standard
The Front-End Limit (28% Rule)
- Calculation:Front-End Limit = Gross Monthly Income ร 0.28
- What It Covers:Principal, Interest, Property Taxes, and Homeowners Insurance (PITI)
- Why 28%:This threshold ensures you maintain financial flexibility for savings, investments, and unexpected expenses
- Example:If you earn $100,000/year ($8,333/month), your front-end limit is $2,333/month for housing
The front-end DTI ratio limits your housing costs (PITI) to 28% of your gross monthly income. This ensures you have sufficient income remaining for other expenses.
The front-end limit is often the constraining factor for high-income earners with low debt.
The Back-End Limit (36% Rule)
- Calculation:Back-End Limit = (Gross Monthly Income ร 0.36) - Monthly Debt Obligations
- What It Includes:Housing (PITI) + Car Loans + Student Loans + Credit Card Minimums + Other Debts
- Why 36%:This threshold prevents you from becoming "house poor" and maintains room for savings and lifestyle expenses
- Example:If you earn $100,000/year and have $500/month in other debts, your back-end limit for housing is $2,500/month ($3,000 - $500)
The back-end DTI ratio limits your total debt payments (housing + other debts) to 36% of gross monthly income. This accounts for all your financial obligations.
The back-end limit is often the constraining factor for buyers with significant existing debt.
The Affordability Ceiling
- Determining Factor:The calculator identifies whether you're "Income Limited" (front-end) or "Debt Constrained" (back-end)
- Price Calculation:Uses the affordability ceiling to back-calculate the maximum home price using standard mortgage formulas
- Hidden Costs:Accounts for property taxes and insurance, which can consume 15-25% of your monthly payment
- Down Payment Impact:A larger down payment reduces your loan amount, allowing you to afford a higher-priced home within the same DTI limits
Your maximum affordable home price is determined by the lower of the front-end and back-end limits. This ensures you meet both underwriting standards.
The 2026 Stress Test and Rate Sensitivity
Mortgage Stress Test (+2% Rate Increase)
- Purpose:Protects against future rate increases and ensures long-term affordability
- Impact:A 2% rate increase can reduce your affordable home price by $75,000-$100,000
- Example:At 6.8%, you might afford $400K. At 8.8%, you might only afford $325K
- Safety Buffer:The difference between current and stress-test affordability shows your "safety zone" for rate volatility
The 2026 stress test calculates your affordability assuming interest rates increase by 2 percentage points. This ensures you can handle rate increases without financial distress.
The stress test is a standard 2026 underwriting requirement in many markets.
Understanding Rate Sensitivity
- Payment Impact:A 1% rate increase adds approximately $50-70/month per $100K borrowed
- Price Impact:A 1% rate increase can reduce your affordable home price by $30,000-$50,000
- Long-Term Cost:Over 30 years, a 1% rate difference can cost $30,000-$50,000 in additional interest
- Strategy:Consider locking in rates when they're favorable, or wait for rate drops if you're not in a hurry
Interest rates directly impact your monthly payment and affordable home price. Understanding this sensitivity helps you make informed decisions.
The Tax & Insurance "Silent Tax" and Hidden Costs
Property Taxes and Insurance Breakdown
- Property Taxes:Typically 1-2% of home value annually, but can be 2-3% in high-tax states like Texas, New Jersey, or Illinois
- Homeowners Insurance:Typically $1,200-$2,400/year, but can be $3,000+ in climate-risk zones (coastal areas, wildfire zones)
- 2026 Increases:Many areas are seeing 10-20% increases in both property taxes and insurance premiums
- Impact on Affordability:High taxes/insurance can reduce your affordable home price by $50,000+ without any change in income
Property taxes and homeowners insurance (the "Silent Tax") typically consume 15-25% of your total PITI payment, depending on your location.
The calculator shows the exact percentage breakdown: principal, interest, taxes, and insurance.
The 1% Maintenance Rule
- Calculation:Annual Maintenance = Home Value ร 0.01 (or $333/month on a $400K home)
- What It Covers:Roof repairs, HVAC replacement, plumbing, electrical, painting, landscaping, and other maintenance
- Why It Matters:This cost is often invisible in lender approval letters but critical for your actual budget
- 2026 Reality:With rising labor and material costs, maintenance expenses may exceed 1% in many markets
Homeownership requires ongoing maintenance. The 1% rule suggests budgeting 1% of your home's value annually for repairs and maintenance.
House Affordability Calculator FAQ
? What is the 28/36 rule and why does it matter?
The 28/36 rule is the gold standard for mortgage affordability. The 28% front-end ratio means your housing costs (PITI: Principal, Interest, Taxes, Insurance) should not exceed 28% of your gross monthly income. The 36% back-end ratio means your total debt payments (housing + car loans + student loans + credit cards) should not exceed 36% of gross income. While lenders may approve up to 43-50% DTI, staying within 28/36 ensures you won't become "house poor" and maintains financial flexibility.
? How do my current debts reduce my home-buying power?
Your monthly debt obligations directly reduce your back-end DTI limit. For example, if you earn $8,333/month (gross), your back-end limit is $3,000 (36%). If you have $500/month in car and student loan payments, only $2,500 remains for housing. This can reduce your affordable home price by $50,000-$100,000 or more, depending on interest rates. The calculator shows exactly how much your debt is reducing your buying power.
? What happens to my affordability if interest rates rise by 2%?
A 2% rate increase significantly reduces affordability. For example, on a $400,000 loan at 6.8%, your monthly P&I is $2,606. At 8.8%, it's $3,155โa $549/month increase. This can reduce your affordable home price by $75,000-$100,000. The calculator includes a Stress Test toggle that shows your affordability at +2% rates, which is a standard 2026 underwriting requirement to ensure you can handle rate increases.
? What percentage of my monthly payment goes to taxes and insurance?
Property taxes and homeowners insurance (the "Silent Tax") typically consume 15-25% of your total PITI payment, depending on your location. In high-tax states like Texas or New Jersey, this can be even higher. The calculator shows the exact breakdown: what percentage goes to principal, interest, taxes, and insurance. This "silent tax" is often overlooked but can significantly impact your monthly budget.
? What is the difference between Conservative (25/33), Standard (28/36), and Aggressive (33/43) affordability?
Conservative (25/33): Financial freedom zone. You'll have room for savings, investments, and unexpected expenses. Standard (28/36): Lender recommended. This is the traditional underwriting standard that balances approval with financial safety. Aggressive (33/43): "House Poor" risk. You'll be stretched thin, with little room for savings, maintenance, or lifestyle expenses. The calculator shows all three tiers so you can choose based on your risk tolerance.
? Why does the bank say I can afford more than this calculator?
Lenders focus on the "Legal Limit" (DTI of 43-50%) to maximize loan volume. They don't account for your specific lifestyle, childcare, travel goals, or the 1% maintenance rule (1% of home value annually for repairs). This calculator prioritizes your "Wealth Limit" based on the 28/36 rule, ensuring you maintain financial flexibility and avoid becoming house poor.