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Finance

The 28/36 Rule: How Much Loan Can You Actually Afford?

Gizmoop Team · 7 min read · May 23, 2026

The 28/36 rule says housing costs should stay under 28 percent of gross monthly income, and total monthly debt under 36 percent. It is the simplest and most widely cited affordability benchmark for buying a house. Modern lenders allow you to borrow more than the rule permits, but the rule defines the comfortable, sustainable budget.

The two numbers

28 percent (housing). Your monthly housing payment, including mortgage principal and interest, property taxes, homeowners insurance, HOA dues, and PMI if applicable, should not exceed 28 percent of your gross monthly income.

36 percent (total debt). Your housing payment plus all other monthly debt payments (car loans, student loans, credit card minimums, personal loans) should not exceed 36 percent of your gross monthly income.

Affordability table at common incomes

Gross annual incomeGross monthly28% housing limit36% total debt limitApprox home price (20% down, 6.5% rate)
$50,000$4,167$1,167$1,500$190,000
$75,000$6,250$1,750$2,250$285,000
$100,000$8,333$2,333$3,000$375,000
$150,000$12,500$3,500$4,500$565,000
$200,000$16,667$4,667$6,000$750,000
$300,000$25,000$7,000$9,000$1,125,000

Home price estimates assume 20 percent down payment, 6.5 percent 30-year fixed mortgage rate, 1.2 percent annual property tax, 0.4 percent annual insurance, no HOA fees, and no PMI. Higher rates or lower down payments reduce the affordable price; lower property taxes or no HOA increase it.

Worked example

Household: $100,000 gross annual income, $400/month car loan, $300/month student loans, $50/month credit card minimums.

Step 1: Gross monthly = $100,000 / 12 = $8,333.

Step 2: 28 percent housing limit = $8,333 × 0.28 = $2,333.

Step 3: 36 percent total debt limit = $8,333 × 0.36 = $3,000.

Step 4: Other debt = $400 + $300 + $50 = $750.

Step 5: Maximum housing under the 36 percent rule = $3,000 - $750 = $2,250.

The binding constraint is the 36 percent rule because of existing debt: maximum housing is $2,250, not $2,333. If the household paid off the car ($400/month), the binding constraint would shift to the 28 percent rule and they could afford the full $2,333.

What lenders actually allow

Conventional mortgage underwriters typically allow back-end DTI (total debt) up to 43 percent for most loans, 45 percent with strong credit, and up to 50 percent for FHA loans. Front-end DTI (housing only) is usually allowed up to 31 percent for FHA and 28-33 percent for conventional.

So you can get a bigger loan than the 28/36 rule suggests. Whether you should is a different question. Lenders maximize the loan you qualify for; they do not optimize your overall financial life.

Why the rule is conservative for a reason

The 28/36 rule leaves room for everything else in life: retirement saving (ideally 15 percent of income), emergency fund building, healthcare costs, vacations, and unexpected expenses. Stretching to 40 percent of income on housing alone leaves much less for these.

The 2008 housing crisis was driven partly by mortgages issued to borrowers with DTI ratios well above 50 percent. Many were unable to handle the payments when home values dropped or job losses hit. The 28/36 rule provides margin against these shocks.

Adjusting for your situation

Two-income household: The rule still applies to combined gross income. But consider what happens if one income disappears (job loss, parental leave, illness). Many households use the higher-earner's income alone as the 28/36 check for safety.

High-cost-of-living areas: San Francisco, NYC, Toronto, London, Sydney all break the rule for many residents. Stretching to 35-40 percent of gross income on housing is common. The cost: less retirement saving, more financial stress, less margin. Some people accept the trade-off; others move to lower-cost areas.

Self-employed or variable income: Use your conservative income estimate, not your peak year. Tax-deducted business income is the safe baseline for affordability.

Using our loan calculator

Plug your maximum monthly payment (calculated from the 28 percent rule) into our loan calculator at any expected interest rate to find the home price you can afford. Vary the down payment and rate to see how sensitivity changes the affordable price. The right house is one you can comfortably afford within the 28/36 rule, not the maximum a lender will approve.

Frequently asked questions

A budgeting guideline that says total housing costs (mortgage payment, property tax, insurance, HOA) should stay below 28 percent of gross monthly income, and total monthly debt payments (housing plus car loans, student loans, credit card minimums) should stay below 36 percent. It is a conservative benchmark used by lenders and financial planners.

Gross monthly income at $100,000/year is $8,333. The 28 percent housing limit is $2,333/month. At current mortgage rates around 6.5 percent and 20 percent down payment, $2,333 supports about a $375,000 home (mortgage of $300,000 plus taxes and insurance). On a 36 percent total debt limit, you can also carry $667/month in other debt before approaching the cap.

Closely related. DTI (debt-to-income) ratio is what mortgage underwriters calculate: monthly debt payments divided by gross monthly income, expressed as a percentage. The 28 in 28/36 is housing DTI (front-end DTI). The 36 is total DTI (back-end DTI). Most lenders today allow back-end DTI up to 43 percent for conventional loans, 50 percent for FHA. The 28/36 rule is more conservative than what lenders permit.

Principal plus interest on the mortgage, plus property tax, plus homeowners insurance, plus any HOA or condo fees, plus private mortgage insurance (PMI) if your down payment is under 20 percent. This is sometimes called PITI plus HOA. Some lenders include flood insurance and other mandatory costs.

Housing costs (the 28 number above) plus minimum monthly payments on all other debt: car loans, student loans, credit card minimums, personal loans, child support, alimony. Utilities, insurance, food, and discretionary spending are not counted. The number tracks fixed debt obligations only.

The rule traces back to Fannie Mae and Freddie Mac underwriting guidelines from the 1970s-80s, when mortgages required higher equity and conservative ratios because of higher interest rates. Today most lenders use higher cutoffs (43-50 percent back-end DTI for non-jumbo loans), but 28/36 remains the prudent personal budgeting benchmark.

Most personal finance experts recommend yes. Lenders maximize the loan you qualify for; the 28/36 rule helps you maximize your financial comfort. Houses that stretch a budget look fine on paper but reduce flexibility for retirement saving, emergencies, vacations, and unexpected costs. The 28/36 rule gives you margin for life.

In San Francisco, NYC, London, or other expensive cities, the 28 percent rule can be impossible to follow because housing costs are higher relative to income. Many residents stretch to 35-40 percent of gross. The trade-offs: less retirement saving, more financial stress, less margin for emergencies. Use the rule as a directional guide and consciously accept the risk of going beyond it.

For renters, only the 28 percent applies to rent. Total debt at 36 percent still holds (rent plus car loans plus student loans plus credit cards). Renters often have an easier time staying under 28 percent because rent is typically cheaper than buying in most markets. The freed-up money should ideally go to retirement saving and a future down-payment fund.

Increase income (career growth, side income). Decrease other debt (pay off cars and credit cards before applying for a mortgage). Save a larger down payment (reduces PMI and lowers the loan size). Improve credit score (lower interest rate means lower monthly payment for the same loan). Wait for lower interest rates (probably the slowest path).