These are long-standing guidelines lenders and planners use — not rules you have to follow, and not advice. Zowly shows you where your numbers land against them. What you do with that is yours.
A common yardstick: keeping rent around 30% of your gross (before-tax) income tends to leave room for everything else. Above it isn't "wrong" — it just means housing is taking a bigger bite, and the rest of your budget has less give.
Put down 20% or more and you skip private mortgage insurance (PMI). Under 20%, PMI is added to your payment — usually 0.5%–1.5% of the loan per year — until you reach 20% equity, at which point you can ask to drop it.
You can buy with far less down (FHA 3.5%, some conventional 3%, VA/USDA 0%). 20% is just the line where the loan looks strongest and costs least.
Lenders measure debt-to-income (DTI) — your monthly debt divided by your gross monthly income:
Front-end: your housing payment (principal, interest, taxes, insurance — "PITI") ideally sits at or under 28% of income.
Back-end: all your debt (housing + car + cards + student loans) ideally under 36%.
In practice, many loans still approve back-end DTI up to 43–45%, and up to 50% with strong "compensating factors" — a 720+ credit score, a bigger down payment, or solid cash reserves.
1. Your emergency cushion. 3–6 months of your essential expenses, set aside. Three months if your income is steady and dual; closer to six (or more) if it's single-income or variable. If you're also carrying debt, see pay off debt or build the cushion first?
2. Lender reserves. When you buy, lenders like to see months of your mortgage payment still in the bank after closing — often around 6 months. The lesson: don't drain your cushion to make the down payment. They're separate pots.
3. Home maintenance reserve. Once you own, set aside a share of the home's value each year for upkeep — and older homes need more:
| Home age | Set aside / year |
|---|---|
| Under 10 years | ~1% of value |
| 10–30 years | ~2% of value |
| Over 30 years | ~3% of value |
So a $300,000 home that's 20 years old → roughly $6,000 a year, or $500 a month, set aside for when — not if — something wears out.
These aren't separate facts — they connect. Your income sets what housing payment (28%) and total debt (36%) you can carry. The home price sets your down payment (20%) and your payment, which drives the lender reserves. Your payment and expenses set your emergency cushion (3–6 months) and, once you own, the maintenance reserve.
A financially healthy buyer usually has all of it lined up at once: 20% down, housing under 28% of income, total debt under 36%, and 3–6 months of cushion still in the bank after buying. That's the picture a bank runs — and the one Zowly helps you see for yourself.
These are guidelines, not guarantees — and not advice. Every lender, home, and household is different, and the exact numbers move. Zowly is a calculation and education tool: it shows you where you stand against these common rules of thumb, so the decision is yours to make with clear eyes. For a decision this big, a qualified professional is worth a conversation.