How Much House Can I Afford on My Income?

The debt-to-income ratio, in plain terms

Debt-to-income ratio, or DTI, is the tool lenders use to weigh your monthly debts against your gross monthly income. Gross income is what you earn before taxes and other deductions. The ratio itself is simple: your monthly obligations divided by your monthly income. Lenders look at it in two pieces.

Front-end ratio: the housing piece

The front-end ratio is your total housing payment divided by your gross monthly income. Total housing payment means the full payment: principal, interest, property taxes, homeowners insurance, and HOA dues where they apply. A common guideline is to keep this around 28% of gross income.

Back-end ratio: everything you owe

The back-end ratio adds every other monthly debt on top of the housing payment: car loans, student loans, credit card minimums, and anything else that shows on your credit. A common guideline is to keep all of it together around 36% of gross income.

These are guidelines, not universal cutoffs. Programs and lenders vary, and many programs accept higher ratios when the rest of your file is strong, for example a larger down payment or solid reserves. The CFPB explains debt-to-income ratio in plain language, and Fannie Mae covers why understanding debt is essential. Your lender confirms the ratios that apply to your program at application.

What counts as income

Lenders count income they can document and that they expect to continue. The more stable and verifiable the income, the more weight it carries.

Salary and W-2 income

For salaried borrowers, lenders use gross pay from pay stubs and W-2s. Regular bonuses, overtime, and commissions can count too, usually when they show a consistent history on the documents you provide.

Self-employment

Self-employed borrowers are typically qualified on net income, what the business actually keeps after expenses, not gross revenue. Lenders usually average one to two years of tax returns to find a stable number. If your income has grown, the average may still reflect the full history, so the conversation matters as much as the paperwork.

Other income

Rental income, alimony, child support, and investment income can count when they are documented and likely to continue. The rule is the same across all of it: lenders want income they can verify and expect to keep seeing.

What counts as debt

The debt side of the ratio is every monthly obligation that shows up on your credit report or that you are legally required to pay:

• Car loans and leases: the full monthly payment counts.
• Student loans: the monthly payment counts, whether in repayment or on a documented plan.
• Credit cards: the minimum monthly payment counts, not the full balance.
• Other obligations: personal loans, alimony, child support, and any other monthly payment you are committed to.

Day-to-day costs like utilities, groceries, phone bills, and streaming subscriptions are typically not counted in DTI. Lenders focus on the obligations you have already committed to in writing, because those are the payments that compete with a mortgage.

Why the full payment matters, not just the loan payment

The 28% guideline is measured against the full housing payment, not the principal and interest alone. That full payment has five parts: principal, interest, property taxes, homeowners insurance, and HOA dues where they apply. Two buyers with the same loan amount and rate can have very different full payments, because taxes and insurance vary widely by home and location.

This is also why a mortgage calculator that only shows principal and interest can undersell the real cost by hundreds of dollars a month. The guide on what affects your monthly payment walks through each piece and how it moves the number.

The down payment's role in what you can borrow

Your down payment sets the size of the loan. Put more down and you borrow less, so your monthly payment is lower at the same rate, which means the same income can support a higher price. Put 20% down on a conventional loan and you typically avoid mortgage insurance too, which keeps the full payment lower. A smaller down payment keeps more cash in your pocket but raises the loan amount and the payment, and often adds mortgage insurance until your equity builds.

The guide on whether you really need 20% down and the 3% vs. 5% vs. 10% down comparison show how the choice changes the payment and the cash you bring.

A worked example: $90,000 a year, no other debts

Numbers are easier to feel with an example. This one is an illustration for planning, not a quote and not a preapproval. Every assumption is labeled, and the rate is illustrative: 6.5%, for example only. Rates change and are set at application.

Key takeaways

• Lenders weigh four things together: income, debts, down payment, and the full monthly payment.
• The common guideline is about 28% of gross income for housing and 36% for all debts, but programs and lenders vary and these are guidelines, not cutoffs.
• The full payment includes principal, interest, taxes, insurance, and HOA, so the same loan can mean very different payments in different areas.
• The real number comes from your actual income, debts, down payment, and the state the property is in, not from a rule of thumb.

Frequently asked questions

Does my credit score change what I can afford?

Yes, in a real way. Your credit score influences the rate you are offered and which programs you qualify for, and a higher rate means a higher payment at the same price. The 28% and 36% math does not change, but the payment that math produces does, so the same income can support more or less house depending on your credit profile. Improving your score before you apply can widen your range.

Can I include a co-borrower's income?

Yes, if the co-borrower is on the loan. Lenders combine both borrowers' income and both borrowers' debts when they calculate the ratios, which can raise the amount you qualify for. Both credit profiles are part of the picture, so the conversation should cover the whole household, not just the higher earner.

What if my debts push me over 36%?

You have options. Pay down or pay off debt before you apply, choose a lower price range, or look at programs that allow higher ratios with compensating factors like a larger down payment or stronger reserves. Which path fits depends on your numbers, and that is exactly what Kladi lays out in a short conversation.

Primary sources

• CFPB: What is a debt-to-income ratio?
• Freddie Mac: Am I financially prepared to take out a home loan?
• Freddie Mac: Debt-to-income ratio calculator
• Fannie Mae: Why understanding debt is essential