Mortgage rules often use two ratios at once. The front-end ratio caps housing cost; the back-end ratio caps housing plus other debt. Whichever gives the lower dollar amount sets your budget. For six combinations of income and debt, the examples below show which one wins.
See which ratio applies to you →
Which limit applies
| Income | Monthly debts | Housing limit (28%) | Total-debt limit (36% minus debts) | Applies | Max price |
|---|---|---|---|---|---|
| $60,000 | $300 | $1,400 | $1,500 | housing | $223,417 |
| $60,000 | $1,500 | $1,400 | $300 | total-debt | $76,475 |
| $100,000 | $300 | $2,333 | $2,700 | housing | $327,268 |
| $100,000 | $1,500 | $2,333 | $1,500 | total-debt | $236,775 |
| $150,000 | $300 | $3,500 | $4,200 | housing | $471,848 |
| $150,000 | $3,000 | $3,500 | $1,500 | total-debt | $236,775 |
Low debt means the front-end limit applies, and extra debt barely matters. High debt means the back-end limit applies, and every dollar of debt reduces your housing budget.
What we assumed
- Gross income is before tax. Debts are minimum monthly payments (car, student loans, card minimums).
- Property tax 1.2% of price per year, insurance $1,400 per year, PMI 0.7% of the loan when the down payment is under 20%.
- These are rule-of-thumb limits. Lenders also weigh credit score, savings and the property.
Related calculators: Home Affordability Calculator, Credit Card Payoff Calculator.
Questions people ask
What counts as debt in the back-end ratio?
Required monthly payments such as car loans, student loans and credit card minimums. Rent, utilities and groceries do not count.
Estimates for general education, not financial, tax or legal advice. Real results depend on your lender, employer, tax situation and location. See the disclaimer.