How does the affordability calculator work?
This calculator uses two widely accepted financial guidelines — the front-end ratio and the back-end ratio (28/36 rule) — to tell you whether a purchase fits within healthy financial boundaries based on your income.
The Front-End Ratio (Housing)
For housing costs, financial experts recommend spending no more than 28% of your gross monthly income on housing. This is called the front-end ratio or the housing ratio. For example, if you earn $5,000/month, your maximum housing cost should be around $1,400/month.
The Back-End Ratio (Total Debt)
Your total monthly debt obligations — including housing, car payments, student loans, and minimum credit card payments — should not exceed 36% of gross monthly income. Some lenders allow up to 43%, but 36% is the conservative, safe threshold used by most financial advisors.
What is the 28/36 rule?
The 28/36 rule is the most widely used affordability guideline in personal finance. It states:
- 28% — maximum percentage of gross income for housing costs
- 36% — maximum percentage of gross income for all debt combined
Most banks and mortgage lenders use this rule when deciding whether to approve a loan. Staying within these limits gives you a comfortable financial cushion for savings, emergencies, and living expenses.
How much car can I afford?
For vehicles, a common rule is the 20/4/10 rule: put 20% down, finance for no more than 4 years, and keep total vehicle costs (payment + insurance + fuel) under 10-15% of gross monthly income. If you earn $4,000/month, that means keeping all car expenses under $400-600/month.
What counts as "existing debt"?
Include any regular monthly debt payments you are already committed to: car loan payments, student loan minimum payments, credit card minimum payments, personal loan payments, and any other monthly obligations to lenders. Do not include utilities, groceries, or subscriptions — those are living expenses, not debt payments.
Common affordability questions this tool answers
People search for affordability help in many ways: can I afford a house on my salary, how much house can I afford, can I afford a $300,000 home, what car can I afford on my income. This tool gives a clear answer for any of these.
The 28/36 rule is the gold standard used by mortgage lenders, financial advisors, and banks worldwide. Staying within these limits means your debt load is considered manageable and you are much less likely to face financial stress from over-borrowing. If you are above the limits, this calculator shows you exactly how much you need to reduce the payment — or how much extra income you would need.
Common scenarios: Can I afford a $250,000 house on a $60,000 salary? At 20% down and a 6.5% rate, the monthly payment is around $1,264 — which is 25% of a $5,000 gross monthly income, just under the 28% threshold. Can I afford a $400 car payment on a $3,000 monthly income? That is 13.3% of income — well within the 15% car guideline.