The Rule Banks Use — Front-End and Back-End DTI
DTI stands for Debt-to-Income ratio. Lenders use two versions:
Front-end DTI (housing only): Your total monthly housing costs — principal, interest, property taxes, and insurance — divided by gross monthly income. Most conventional loans require this to stay at or below 28%. FHA loans allow up to 31%.
Back-end DTI (all monthly debts): All monthly minimum debt payments — housing, student loans, car loans, credit card minimums — divided by gross monthly income. Most conventional loans allow up to 43% maximum. Some programs allow up to 50% with compensating factors like a large down payment or excellent credit score.
| Calculation — $75,000 Salary | Amount |
|---|---|
| Gross monthly income | $6,250 |
| 28% front-end maximum (housing) | $1,750/month |
| 43% back-end maximum (all debts) | $2,688/month |
| If $500/month in other debts, housing room is | $2,188/month |
The bank approves what it approves. That number is the maximum — not the recommendation. The bank's interest is in confirming you can repay the loan, not in optimizing your financial wellbeing or retirement savings rate.
What $1,750 Per Month Actually Buys at 7% in 2026
Working backwards from the front-end DTI ceiling at a $75,000 salary, with the maximum PITI (principal, interest, taxes, insurance) at $1,750 per month:
The median US home price was $420,700 per St. Louis Federal Reserve data for Q1 2026. At this salary level, buying a median-priced home requires either a larger down payment, a dual income, or a salary higher than $75,000 in most markets.
The 28% Rule vs Reality — A More Honest Framework
The 28% front-end ratio is the bank's rule for their risk — not a recommendation for your financial life. The problem with 28% of gross is that it ignores taxes. At $75,000 gross, the take-home pay is approximately $61,390 in a no-income-tax state per 2026 IRS data — $5,116 per month net.
| Housing Budget Rule | Monthly Amount |
|---|---|
| 28% of $75K gross (bank maximum) | $1,750 |
| 28% of $5,116 net (actual take-home) | $1,432 |
| 25% of $5,116 net (planner recommendation) | $1,279 |
The three numbers to know: what the bank will lend (their ceiling), what feels comfortable monthly (your cash flow test), and what lets you still save 10 to 15 percent of income after housing (your real affordability). Number three is the right target.
The Down Payment Reality Check
A 20% down payment on a $350,000 home requires $70,000 in cash before closing costs. Most first-time buyers use lower down payment programs: FHA loans allow 3.5% down with a credit score of 580 or higher, and conventional loans allow 3% down in some programs (such as Fannie Mae HomeReady).
The trade-off: less than 20% down requires PMI (private mortgage insurance), typically $50 to $200 per month until 20% equity is reached. On a $315,000 loan this is approximately $131 per month — money that goes entirely to the insurance company and builds no equity.
At a $75,000 salary, saving $1,000 per month specifically for a down payment produces: $50,000 in 4.2 years, and $70,000 in 5.8 years. This timeline is why many first-time buyers use lower down payment programs rather than wait — in some markets the home appreciates faster than the savings accumulate, making the waiting strategy counterproductive.
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Mortgage Calculator →Disclaimer: This article is for educational purposes only and does not constitute financial advice. Home affordability depends on many individual factors. Consult a qualified mortgage professional for your situation.