How Much House Can You Afford? Start With the 28/36 Rule

Most people shop for a house backwards: fall in love with a listing, then ask whether they can afford it. By that point the answer is always yes, because you want it to be. The better order is the one lenders use — set a monthly payment ceiling first, then only look at houses under it. The standard starting point is the 28/36 rule, and our affordability calculator runs it for you in about thirty seconds. Here's what the rule actually says, and where its blind spots are.

The rule, in two sentences

Cap one: spend no more than 28% of your gross monthly income on housing — and "housing" means the whole PITI payment (principal, interest, property taxes, and insurance), not just the loan. Cap two: keep your total monthly debt payments — housing plus car loans, student loans, credit card minimums — at or under 36% of gross income. Lenders call these your front-end and back-end debt-to-income ratios, and your housing budget is whichever cap produces the lower number.

Front-end vs. back-end: which one binds

If you carry little debt, the 28% housing cap is the one that limits you — the back-end has room to spare. If you carry a lot of debt, the 36% total cap bites first, because your existing payments have already eaten the room the mortgage needed. This is why two people with identical salaries can have honestly different housing budgets: the one with a $700 car payment and a $300 student loan isn't being punished by the bank, they've just already spent part of their 36%.

A worked example

Salary: $96,000, which is $8,000 a month of gross income — before taxes, not what lands in your account. Hold that thought; it matters later.

• Front-end cap: 28% of $8,000 = $2,240 for housing.
• Back-end cap: 36% of $8,000 = $2,880 for all debt. With $600 of existing minimum payments (say, a car loan and a student loan), that leaves $2,280 for housing.
• The lower number wins: the housing budget is $2,240, set by the front-end.

Notice how thin the margin is. If those debts were $1,000 a month instead of $600, the back-end would leave only $1,880 and take over as the binding limit — a $400 debt increase costs $360 of house. The calculator computes both ceilings from your numbers and tells you which one is doing the limiting.

Turning a payment ceiling into a price

$2,240 is a payment, not a listing price, and the conversion depends on rates, taxes, and insurance. If roughly $280 of it goes to property taxes and homeowners insurance, about $1,960 is left for principal and interest. At 6.5% on a 30-year loan, $1,960 a month supports a loan of roughly $310,000 — with 20% down, call it a $385,000 house. At 5.5%, the same payment supports about $345,000 of loan. Rates move your price range more than a year of extra saving does, which is worth knowing before you anchor on a number. Our mortgage calculator lets you work this direction — pick a price, see the full PITI payment, adjust until it fits under your ceiling.

Two more things climb into the payment when they apply: HOA or condo dues, which lenders count as part of your housing number, and private mortgage insurance if you put down less than 20% — a whole subject of its own. Both shrink the loan your $2,240 can carry.

The bank will approve more than this. That's not a compliment.

Lenders routinely approve payments well past the 28/36 guideline — some loan programs stretch back-end ratios into the mid-40s. This isn't generosity. Their model answers one question: how likely is this borrower to default? It says nothing about whether you can still afford daycare, travel, retirement contributions, or a car that will eventually need replacing. An approval is a statement about their risk tolerance, not your comfort. "House-poor" describes exactly the person who mistook one for the other: technically current on the mortgage while everything else in the budget suffocates.

The question is never "what will the bank lend me?" It's "what payment leaves my actual life intact?" Those are different numbers, and only one of them is yours.

The gross-vs-net trap

The rule runs on gross income because lenders think in gross. Your life runs on net. That $8,000 gross month might be $5,900 of take-home after taxes, health insurance, and retirement contributions — so a $2,240 payment is 28% of gross but roughly 38% of the money you actually see. Neither framing is wrong; they answer different questions. This is why our budget planner deliberately uses net income: before you commit to a payment, drop it into a real month of take-home cash flow and see what survives around it.

What counts as a "debt"

For the 36% cap, debts are minimum required payments on borrowed money: car loans, student loans, personal loans, credit card minimums, any other mortgage. Not groceries, not utilities, not your phone plan, not subscriptions — those are living expenses, and the rule already leaves room for them by stopping at 36%. One wrinkle: lenders typically count your credit card minimums even if you pay the balance in full every month, so your on-paper DTI may look slightly worse than your actual habits.

What the rule ignores

The 28/36 rule caps a payment. It says nothing about the rest of the bill: maintenance and repairs (a common rule of thumb is 1% of the home's value per year — real money on a $385,000 house), closing costs of roughly 2–5% of the price due at purchase, moving, and the furniture a bigger place quietly demands. Budget those separately or they'll budget themselves. The rule is also silent on the down payment itself — it caps the monthly payment, but says nothing about whether you have 5% or 20% to put down, and that choice drives both the loan size and whether PMI joins the bill. The CFPB's buying-a-house resources are a good, seller-free walkthrough of the full process and its costs.

Common questions

Is the 28/36 rule a law?

No. It's a conventional-lending guideline that survives because it roughly works. No one will arrest you at 31% — but the further past the caps you go, the less room a bad year has to land in.

What about FHA and VA loans?

Government-backed programs generally allow higher debt-to-income ratios than the conventional guideline — that's part of their point. But a higher allowed ratio is more rope, not more affordability; the payment still comes out of the same paycheck. HUD covers the FHA side directly.

Should I borrow as much as the bank approves?

Almost never. The approval is the top of the lender's risk tolerance, not a recommendation. Set your ceiling from your own budget, and treat the gap between your number and theirs as margin, not money left on the table.

Does student debt count toward the 36%?

Yes — the monthly minimum counts like any other debt. If you're on an income-driven plan, lenders use a documented payment figure under their program's rules, but for your own math the answer is simple: whatever you actually must pay each month occupies part of your 36%.

Start with the ceiling, not the listing. Run your own numbers — income and debts in, both caps out, binding limit flagged — and walk into the search already knowing your number.

This article is general information, not personalized financial advice. How we write and review articles is covered in the editorial note on our About page.