How Much House Can You Afford? The 28/36 Rule Explained

The most common question first-time homebuyers ask is “how much house can I afford?” Lenders have a straightforward framework for answering this: the 28/36 rule. Understanding this rule and how debt-to-income ratios work helps you set realistic expectations before you start house hunting.

The 28/36 Rule Explained

The 28/36 rule sets two spending thresholds based on your gross monthly income (before taxes):

• 28% Rule (Front-end ratio): Your total housing costs should not exceed 28% of gross monthly income. Housing costs include principal, interest, property taxes, homeowner’s insurance, and PMI (PITI).

• 36% Rule (Back-end ratio): Your total monthly debt payments (housing + all other debts) should not exceed 36% of gross monthly income. This includes car payments, student loans, credit cards, and any other recurring obligations.

Formula:

Max Housing Payment = Gross Monthly Income × 0.28
Max Total Debt = Gross Monthly Income × 0.36

Examples at Different Income Levels

Annual Income	Monthly Gross	Max Housing (28%)	Max Total Debt (36%)	Available for Non-Housing Debt
$60,000	$5,000	$1,400	$1,800	$400
$80,000	$6,667	$1,867	$2,400	$533
$100,000	$8,333	$2,333	$3,000	$667
$150,000	$12,500	$3,500	$4,500	$1,000
$200,000	$16,667	$4,667	$6,000	$1,333

For a household earning $100,000 with a $2,333 maximum housing payment at 6.5% interest on a 30-year fixed mortgage (including ~$400/month for taxes and insurance), the maximum home price is approximately $310,000–$340,000 with a 20% down payment.

What Lenders Actually Consider

While 28/36 is the standard guideline, lenders evaluate several additional factors:

Credit score impact on approval:

• 760+: Best rates, easier approval at higher DTI
• 700–759: Standard rates, 28/36 applies
• 640–699: Higher rates, stricter DTI requirements
• Below 640: Difficult approval, may need 25/33 or below

Other factors:

• Down payment size — 20%+ avoids PMI and strengthens your application
• Cash reserves — Lenders want to see 2–6 months of mortgage payments saved
• Employment history — Prefer 2+ years at the same employer or in the same field
• Loan type — FHA allows up to 43% DTI, VA loans up to 41%, conventional typically 36%

Beyond the Rule: What You Can Comfortably Afford

The 28/36 rule tells you what lenders will approve, not what’s comfortable. Many financial advisors suggest stricter personal limits:

• Conservative: 20–25% of take-home pay (after taxes)
• Moderate: 25–30% of take-home pay
• Aggressive: More than 30% of take-home pay

Consider future expenses the rule ignores: home maintenance (budget 1–2% of home value annually), utilities, potential income changes, and your other financial goals like retirement savings and emergency funds.

The sweet spot for most people is spending no more than 25% of after-tax income on housing, leaving room for savings, lifestyle, and unexpected expenses.

Calculate instantly with our Mortgage Affordability Calculator.