The honest answer: you can probably afford less house than the lender’s automated system says, and a lot more than the old 28/36 rule says. This guide walks through the math lenders actually use in 2026-2027, where it breaks down for real buyers, and the five levers that change your answer the most — rate, down payment, debts, state property taxes, and insurance.

The 60-second version

• Lenders will qualify you at up to 50% back-end DTI (debts ÷ gross income) on conventional loans, often into the mid-50s on FHA with an automated approval (50% if manually underwritten), and sometimes above 60% on VA when residual income is strong.
• “Smart max” is almost always 15-25% below the lender max. The lender cares about repayment probability; you also care about living a life.
• Every 1% change in mortgage rate moves affordability roughly 10%. With Mortgage News Daily’s 30-year fixed at 7.18% today (Nov 9, 2026), that math matters.
• Down payment, property tax, and insurance swing the final number more than most buyers expect — by $100-$200K of house for the same monthly budget, depending on state.
• Lender estimates of the 2027 conforming loan limit run $845,000-$850,000 vs. the FHFA-official 2026 limit of $832,750.

Where the 28/36 rule came from — and why it’s incomplete today

The 28/36 rule is 1970s math. It says your housing payment (principal + interest + taxes + insurance, or PITI) shouldn’t exceed 28% of your gross monthly income, and your total debts (PITI + everything else you owe) shouldn’t exceed 36%.

Those ratios came from an era of lower housing costs, fixed-income pensions, no student loans for most borrowers, and much shorter life expectancy after retirement. Today they’re a decent starting point for a conservative buyer, but every modern loan program allows much higher ratios. If you use 28/36 as your personal ceiling, you’ll often underbuy — and if you assume it’s what lenders use, you’ll be surprised when your lender approves you for a lot more.

What lenders ACTUALLY use in 2026-2027

Every loan program has its own DTI math. Here’s what’s current, pulled from the primary-source guides.

VA residual income (the number that actually drives VA approvals)

VA doesn’t just look at your DTI percentage. It also requires a minimum dollar amount of leftover income after you pay the mortgage, other debts, taxes, and maintenance. The required residual varies by region and family size. For a family of four on a loan of $80,000 or more (per VA Pamphlet 26-7 Chapter 4):

Larger families need proportionally more. VA will frequently approve DTIs above 50%, sometimes above 60%, when residual income clears the threshold with room to spare.

“Lender max” vs. “Smart max”

Here’s a real example. Household gross income: $144,000/year ($12,000/month). Modest existing debts: $400 car payment, $150 credit card minimums.

Lender max (conventional, 50% DTI): $12,000 × 50% = $6,000 total debts allowed. Subtract $550 in existing debts → $5,450/month available for PITI. At 7.18% with 10% down, that supports a home of roughly $715,000 (with California-level taxes and PMI). If the automated underwriting approves, the lender says yes.

Smart max (what leaves room for life): target about 33% total debt-to-income → $4,000 max. Subtract $550 existing debts → $3,450/month PITI. Same rate, same down payment, that caps the home around $445,000.

Gap: about $270,000 of house. Both numbers are “true.” The lender’s number is what you’ll be approved for. The smart number is what still lets you fund a retirement account, keep a 6-month emergency fund, and absorb a car-repair bill without panic. Our team helps you find your own number somewhere between the two — closer to the smart number if you want to build wealth, closer to the lender max if you’re buying in a market that’s appreciating faster than you can save.

The full payment math: PITI + HOA + MI

Most online calculators show principal and interest only. Lenders qualify you on the whole monthly obligation. The real monthly payment is:

• P&I — principal and interest, the mortgage proper.
• T — property taxes, divided by 12, escrowed with the lender.
• I — homeowners insurance (and separate flood or wind insurance in FL / SC / coastal VA; earthquake in CA if you buy it).
• MI — mortgage insurance. PMI on conventional loans with less than 20% down (typically 0.3% to 1.5% of the loan amount annually, depending on credit, LTV, and coverage — get a live quote from your lender); MIP on all FHA loans; no monthly MI on VA.
• HOA — if the property has a homeowners association, the lender counts it toward your housing payment. HOA ranges from $0 (most single-family detached) to $400+/month (condos and planned communities).

On a $500,000 home with 10% down in California, the P&I at 7.18% is about $3,048. Add about $500 in property tax (≈1.2% — a California buyer is taxed on the purchase price, not the statewide average; newer communities with Mello-Roos can add $200–$600+/mo more), $125 in homeowners insurance, and maybe $180 in PMI (0.48% annually on a $450K loan). Total PITI: about $3,853. The P&I alone was wrong by about $805/month.

How a 1% rate change moves your buying power

With MND’s 30-year fixed at 7.18% today, here’s what a $3,500/month P&I budget buys at different rates (10% down, 30-year fixed):

A 1% rate move = roughly 10% of buying power, in either direction. This is why the “just wait for rates to drop” strategy is complicated: if rates drop and prices rise 5%, your buying power goes up, but the house you were looking at is now 5% more expensive. If rates drop and prices stay flat, you win. If rates rise and prices rise, you’re squeezed on both ends. Nobody knows which path we’re on, which is why we recommend getting pre-approved at today’s rate on today’s price so you know your real numbers.

How down payment changes your answer

Larger down payment means less loan, lower monthly payment, less PMI, often a better rate. But it also drains your cash reserves. Here’s the same $500,000 home at 7.18%, 30-year:

Dropping from 3% down to 20% down saves $860/month on the same house. But it also ties up $85,000 in cash you can’t use for furniture, a kitchen remodel, or an emergency. There’s no universally right answer — the right answer is specific to your credit, your reserves, and how long you plan to hold the property.

Cash to close: the second limit on what you can afford

Your number has two limits: the monthly payment and the cash. Lenders check both. You need the down payment, plus closing costs, plus any reserves the lender requires — and you want your own cushion on top.

• Closing costs: budget roughly 2-4% of the price for lender, title, escrow and appraisal fees plus prepaid property taxes, insurance and interest. Seller credits and lender credits can cover part of this. Conventional loans cap seller contributions at 3% of the price with less than 10% down (6% with 10-25% down); FHA allows up to 6%; VA allows normal closing costs plus up to 4% in concessions.
• Reserves: many one-unit primary-home loans require no reserves, but some programs, larger loans and weaker files require several months of payments in the bank after closing. Plan on your own cushion either way.
• California supplemental tax bill: after you close, the county reassesses the home at your purchase price and mails a supplemental bill for the difference, usually covering part of the first year. It’s often not paid from your impound account, so set cash aside for it.

Hypothetical: a $500,000 California purchase with 10% down

Mortgage insurance and funding fees by loan type

• FHA: an upfront mortgage insurance premium of 1.75% of the base loan, usually added to the loan, plus an annual premium paid monthly. For most borrowers (30-year loans of $726,200 or less with less than 5% down) the annual premium is 0.55%; with 5% or more down it’s 0.50%. On a hypothetical $482,500 base loan, the upfront premium is about $8,444 and the annual premium starts around $221/month. With less than 10% down, FHA’s annual premium lasts for the life of the loan; with 10% or more down, it ends after 11 years.
• VA: no monthly mortgage insurance, but a one-time funding fee: 2.15% of the loan on first use with less than 5% down, 1.5% with 5% to under 10% down, and 1.25% with 10% or more down (3.3% on later use with less than 5% down). It can be financed into the loan. Veterans receiving VA disability compensation, and certain others, are exempt. On a hypothetical $500,000 VA loan with no down payment, a 2.15% fee is $10,750.
• Conventional PMI: required with less than 20% down. Under the federal Homeowners Protection Act, for borrower-paid PMI on a primary home you can ask to cancel PMI once your balance reaches 80% of the home’s original value (you need a good payment history, and the lender can require proof the value hasn’t dropped). PMI must end automatically when your balance is scheduled to reach 78%, as long as you’re current. On the hypothetical $450,000 loan at 7.18% above, that’s about year 9 for the 80% request and about year 10 for automatic cancellation on the original schedule. Extra principal payments get you to 80% sooner. Fannie Mae and Freddie Mac also allow cancellation based on a new appraisal if your home’s value has risen, subject to how long you’ve owned it.

Hypothetical illustrations, not an offer. See “About these examples” above for the APR and assumptions.

Student loans, car payments, and credit cards

Here’s where loan programs differ in ways that can completely change what you can afford. The three programs calculate student-loan payments three different ways:

• Fannie Mae: if your credit report shows your actual payment, use that. If you’re on an income-driven plan with a documented $0 payment, you can qualify at $0. Otherwise use 1% of the outstanding balance. Rule: Selling Guide B3-6-05.
• Freddie Mac: stricter. Even if your actual payment is $0, Freddie requires 0.5% of the outstanding balance. If the credit report payment is higher, use that. Rule: Freddie 5401.2.
• FHA: use the credit-report payment if above zero, or 0.5% of the outstanding balance if the report shows zero. Per HUD Mortgagee Letter 2021-13, which replaced the old 1% rule.

Example: $60,000 in federal student loans with a documented $0 IBR payment. Fannie counts it as $0 and your DTI is fine. Freddie counts it as $300/month and your DTI jumps 2-3 points. FHA counts it as $300/month too. If student loans are keeping you out of qualification, ask your loan officer to try Fannie first — often that single routing decision changes a “no” to a “yes.”

Car payments and credit cards are simpler: whatever appears on your credit report counts, period. Credit cards are counted at the minimum payment. If your credit cards show a $600 minimum payment, that eats $600 out of your DTI capacity every month — which, at a 7.18% rate, is roughly $88,000 of loan — close to $100,000 of home price with 10% down. Paying down two credit cards before applying often buys you more house than a 0.25% rate improvement would.

State-by-state property tax and insurance (OnPoint’s 9 states)

Where you buy changes what you can afford by a lot. Same income, same loan, same rate — but the property tax and insurance line items vary wildly state by state. Approximate effective property-tax rates and typical homeowners-insurance ranges, 2026:

On a $500,000 home, the difference between buying in Idaho ($0.65% tax + $1,100 insurance) and Texas (1.60% tax + $3,500 insurance) is about $660/month in carrying costs. Same house, same loan, totally different monthly budget. If you’re relocating and comparing cities, factor this in before you anchor on a price range.

Hypothetical Orange County example: a $1.1 million Irvine townhome

Most “how much house” calculators assume one national tax rate and no HOA. In Irvine and much of South Orange County, that leaves out hundreds of dollars a month. Here’s a hypothetical $1,100,000 townhome with 10% down ($110,000), using the same 7.18% 30-year fixed market average. The $990,000 loan is above the 2026 baseline limit but under Orange County’s $1,249,125 high-balance conforming limit, so it can still be a conventional loan instead of a jumbo. (High-balance loans can price a little differently from standard conforming loans.)

Income needed (with the same $550/month of other debts): at a 45% debt-to-income ratio, about $20,900-$22,100/month ($251K-$265K/year). At a more comfortable 33%, about $28,500-$30,200/month ($342K-$362K/year).

Cash to close: $110,000 down + 2-4% closing costs ($22,000-$44,000) + two months of payments as a cushion (about $17,700-$18,800) = about $150,000-$173,000, plus the supplemental property tax bill after closing.

Mello-Roos and HOA count in your DTI. Mello-Roos and other special taxes appear on the property tax bill and in the seller’s required Mello-Roos disclosure. Lenders count them in your housing payment, the same as HOA dues. Many rise up to 2% a year, and some end after a set number of years. Ask for the exact amounts before you write an offer.

Insurance is the wild card. Many insurers have limited new homeowners policies in California, especially in high wildfire-risk areas, including parts of Irvine near open space and the foothills. If you can’t get a standard policy, the California FAIR Plan offers fire coverage as a last resort. Buyers usually pair it with a separate difference-in-conditions (DIC) policy for theft, water damage and liability, and the combined cost can be well above the range shown. In a townhome, check the CC&Rs: the HOA’s master policy may cover the building, so you may need only a walls-in (HO-6) policy. Get real quotes early in escrow, before you remove your contingencies, because the lender requires proof of coverage to close.

Hypothetical illustration, not an offer or rate quote. At 7.18% with 1.375% of the loan amount in prepaid finance charges, no discount points, and PMI of about $396/month until the balance reaches 78% of the original value, this example’s APR is about 7.66%. Payments, taxes, HOA and insurance vary by property. See “About these examples” above.

2027 conforming loan limits (projected) and why they matter for affordability

If you’re near the top of what you can afford in a high-cost area, the conforming loan limit is the invisible line between “conventional” (lower rates, fewer requirements) and “jumbo” (often higher rates, stricter credit and reserve requirements).

As of today, the FHFA’s official 2026 one-unit baseline is $832,750, with a high-cost ceiling of $1,249,125 for designated metro areas (most of the California Bay Area, LA metro, the DC suburbs, etc.). FHFA announces 2027 limits in late November each year — so the official 2027 numbers aren’t published as of this writing (Nov 9, 2026).

What the industry is already doing: per National Mortgage Professional (Oct 9, 2026), over 50 lenders are already financing loans under three competing projected 2027 baselines — $845,000, $847,440, or $850,000 — ahead of FHFA’s official announcement. For you as a buyer, this matters if your purchase price would push your loan past the 2026 limit but keep you under a projected 2027 limit: an early-execution conventional loan may price better than a jumbo — compare both.

OnPoint is a wholesale broker, and at least one of the wholesale lenders we work with is already accepting applications at an estimated 2027 one-unit conforming limit of $845,000 (for applications dated September 10 to December 1, 2026), subject to that lender’s own eligibility rules. If you’re near that threshold, ask us — we’ll check whether an early-limit option fits your scenario and what the rate differential looks like. Once your loan has closed, a lower official FHFA number doesn’t change your signed loan terms. If you’re locked but not yet closed when FHFA announces, each lender handles it differently, so ask how your lender treats that before you lock. Early-limit loans usually require a full appraisal (no appraisal waiver).

The stress test every borrower should run

Before you lock in the biggest payment the lender will approve, run these three scenarios yourself. If any of them keeps you up at night, aim lower.

1. What if your rate went up 1%? You already know how to calculate this — the table in the rates section above shows the math. You can’t refinance to a lower rate if the market has moved against you, so make sure today’s payment still works at 1% higher.
2. What if your household income dropped 20%? One partner losing a job, a commission year coming in soft, a bonus getting cut. Does the payment still work on 80% of your current gross?
3. How many months of PITI do you have in liquid reserves AFTER closing? Lenders require 2-6 months of reserves depending on loan type. You should want at least 6 months for your own sanity, 12 if you have variable income.

If your lender max puts you under 2 months of reserves after closing, the lender max is too high for you, regardless of what the DTI calculator says.

Frequently asked questions

How is “how much house I can afford” actually calculated?

Lenders back into it from your maximum debt-to-income ratio. Take your gross monthly income, multiply by the max DTI for your loan program (50% for conventional, often mid-50s for FHA with an automated approval, variable for VA based on residual income), subtract your existing monthly debts, and the remainder is your maximum monthly housing payment (PITI + HOA + any MI). From there, back into a home price given a down payment and a rate.

What DTI do lenders use in 2026?

Conventional (Fannie DU) caps at 50% back-end. Freddie (LPA) has no fixed cap when LPA accepts the file. FHA’s automated system often approves into the mid-50s; manually underwritten FHA loans cap at 50% with two compensating factors. VA uses residual income tables in addition to DTI and frequently approves above 50%. See the table in the “What lenders actually use” section for the full breakdown.

How much income do I need for a $500,000 house?

At 7.18%, 10% down, typical California new-buyer property tax and insurance, total PITI is about $3,850/month (using ~1.2% California property tax). To stay under a 50% back-end DTI with modest other debts (say $400 car + $150 credit cards), you need gross income of about $8,800-$9,500/month ($106K-$114K/year). For a smarter 35% DTI, you’d want about $12,600/month ($151K/year) or higher.

Is the 28/36 rule still valid?

As a conservative personal budget guideline, yes. As a prediction of what lenders will approve you for, no — lenders will qualify you for much more. The 28/36 rule is a prudent “smart max” starting point; the lender’s max is often 15-25% above it.

Does my down payment affect how much I can qualify for?

Indirectly, yes. A larger down payment means a smaller loan, a lower P&I payment, and no (or lower) PMI — so your DTI improves for the same home price. Going from 3% down to 20% down on a $500,000 home saves about $860/month (see table above). That extra DTI capacity can qualify you for a bigger house, or just give you breathing room.

Do student loans really count against me?

Yes, but how depends on the loan program. Fannie Mae allows a documented $0 income-based payment. Freddie Mac uses 0.5% of the balance regardless. FHA uses 0.5% of the balance if your credit report shows $0. Pick the program that treats your student loans most favorably — sometimes that’s the single biggest qualification factor.

How can I afford more house without earning more?

Four levers that move affordability without a raise: (1) pay down revolving debt that’s eating DTI capacity, (2) put more down to reduce loan size and eliminate PMI, (3) consider a lower-rate loan structure like a 7/6 ARM if you don’t plan to hold long-term, (4) buy in a lower-tax, lower-insurance state — the carrying cost difference between Idaho and Texas is $660/month on the same house. For most buyers, lever 1 is the fastest win.

Where this fits in your home-buying journey

• Run the OnPoint affordability calculator — plug in your real numbers and see the output in 30 seconds.
• Basic PITI calculator — once you have a target price, confirm the full monthly payment including tax and insurance.
• First home step by step — the 10-step renter-to-owner path.
• Home appraisal guide (2026) — what happens after you’re under contract.
• Compare mortgage offers — side-by-side true-cost calculator for competing lender quotes.
• Today’s mortgage rates — updated daily.

Ready to find YOUR number?

A pre-approval conversation with a wholesale broker is the single fastest way to replace guesses with real numbers at today’s rates and today’s prices. OnPoint is licensed in California, Colorado, Florida, Idaho, Maryland, New Hampshire, South Carolina, Texas, and Virginia, and we close loans with 20+ wholesale lenders. Call us at (877) 870-0007 or request a quote.

Sources: Fannie Mae Selling Guide B3-6-02 & B3-6-05; Freddie Mac Guide 5401.2; HUD Handbook 4000.1 II.A.5.d.viii; VA Pamphlet 26-7 Chapter 4; Mortgage News Daily (current rate); FHFA conforming loan limits; NMP 2027 projected limits.

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