The standard debt-to-income ratio used in the mortgage industry is called the 28/36 rule.

Why such a difference? To understand that, it’s important to understand the guidelines used by mortgage providers. Yet shows a mortgage payment that’s $579 higher than what Ramsey suggests. Ramsey, on the other hand, suggests a 15-year fixed-rate mortgage. Keep in mind, is showing you what you can afford on a 30-year fixed-rate mortgage. Perhaps unsurprisingly, ’s calculator suggests you can afford to buy more house than Ramsey’s. Ramsey’s affordability calculator also gives you an estimate of how much house you can afford based on your monthly take-home pay: How Much House Can You Responsibly Afford?ĭave Ramsey’s rule allows you to buy much less house than most mortgage lenders and real estate agents want to sell you - not to mention, much less house than other calculators will say you can afford. To get this number, simply look at your recent paychecks. Gross income is the amount you make before taxes and other deductions, while net income is the amount you make after taxes and other expenses are taken out. Ramsey advises using your monthly take-home pay (also known as net income or after-tax monthly income) rather than your gross monthly income. To find out your monthly maximum mortgage payment, just take your monthly-after-tax income and divide it by four. Therefore, you hardly need to use the calculator to follow this rule. Ramsey has the simplest affordability calculator you’ll find.Īccording to Ramsey, your monthly housing expenses should never be higher than 25% of your monthly after-tax income. So, if you take home $5,000 a month after taxes, you can afford a $1,250 total monthly housing payment.

Dave ramsey budget planning