Frequently asked questions
What is the 28/36 rule?
The 28/36 rule is a classic guideline used by lenders and financial planners. Your housing costs (mortgage + taxes + insurance) should not exceed 28% of your gross monthly income. Your total debt obligations (housing plus car, student, credit card payments) should not exceed 36% of gross monthly income. Lenders today often approve up to 43–50% DTI but staying at 36% or below gives you financial breathing room.
What is PMI and when do I need it?
Private Mortgage Insurance is required by most conventional lenders when your down payment is less than 20% of the home price. PMI protects the lender, not you. It typically costs 0.5–1.5% of the loan amount annually. On a $400,000 loan, that's $2,000–$6,000/year ($167–$500/month) until you reach 20% equity — at which point you can request cancellation.
What income do I need to buy a $500,000 home?
At 7.1% on a 30-year loan with 20% down ($100k), your mortgage payment is about $2,683/month. Add property tax ($500), insurance ($167) = ~$3,350/month in PITI. Using the 28% rule, you'd need a gross monthly income of ~$11,964, or $143,571/year. With existing debts, the required income rises further.
Should I put 20% down?
Putting 20% down eliminates PMI, lowers your monthly payment, reduces total interest paid, and shows lenders you're a lower-risk borrower. However, it also ties up a large amount of cash. If putting 20% down depletes your emergency fund or investment accounts, a lower down payment with PMI may be the smarter short-term choice — especially if home prices are rising quickly in your market.