The 28/36 Debt-to-Income (DTI) Rule
Most conventional mortgage lenders benchmark qualification using the 28/36 formula:
- Front-End DTI (28%): Your total monthly housing expenses (principal, interest, property taxes, homeowners insurance, and HOA dues) should not exceed 28% of your gross pre-tax monthly income.
- Back-End DTI (36%): Your total monthly debt obligations (housing payment + student loans, car loans, and credit card minimum payments) should not exceed 36% of gross income.
Real-World Example
A household earning $120,000 annually has a gross monthly income of $10,000:
• 28% Max Housing Payment: $2,800 / month
• 36% Max Total Debt Obligations: $3,600 / month
Beyond PITI: Maintenance & Hidden Costs
Many first-time buyers budget only for the mortgage check. Remember to set aside 1% to 2% of the home's value each year for routine repairs, roof maintenance, HVAC upkeep, and property tax reassessments.
Simulate Your Monthly Mortgage
Plug in purchase prices, interest rates, down payments, and taxes with Finova's interactive mortgage tool: