The 28/36 rule is the foundational mortgage affordability guideline used by lenders across the United States. It states that your housing costs should not exceed 28% of your gross monthly income, and your total debt should stay under 36%. This guide explains exactly how the 28/36 rule works and how to calculate your personal limits.
In This Article
The 28/36 rule is one of the most widely used guidelines in personal finance for answering the question every homebuyer asks: how much house can I afford? It gives you two clear numbers – 28% and 36% – that cap how much of your income should go toward housing and total debt. The U.S. Department of Housing and Urban Development (HUD) recommends keeping housing costs within these guidelines for long-term financial stability.
Lenders use it. Financial advisors cite it. And if you’re trying to figure out whether that $450,000 home fits your budget, it’s the fastest way to get an honest answer before you fall in love with a house you can’t afford.
What Is the 28/36 Rule?
The 28/36 rule states that:
The 36% Rule: Your total monthly debt payments (housing + car loans, student loans, credit cards, etc.) should not exceed 36% of your gross monthly income.
This rule has roots in traditional mortgage underwriting guidelines that date back decades. Banks developed it as a practical test to distinguish borrowers who could comfortably carry a mortgage from those who would be stretched dangerously thin.
The “28” caps housing specifically. The “36” caps all debt combined. The gap between them – 8 percentage points – is how much of your income is “allowed” for non-housing debt like a car payment or student loans. Use up that gap with other obligations and you’ll find mortgage lenders tightening up on how much they’re willing to lend you.
How to Calculate Your Numbers
The math is simple. Here’s the step-by-step:
Step 1: Find your gross monthly income. Take your annual pre-tax salary and divide by 12. If you and a partner are buying together, add both incomes. For self-employed buyers, lenders typically use a 2-year average of net income from tax returns.
Step 2: Calculate your 28% housing limit. Multiply your gross monthly income by 0.28. This is the maximum your PITI (principal + interest + property taxes + insurance) should be each month. Some versions also include HOA fees in this number.
Step 3: Calculate your 36% total debt limit. Multiply your gross monthly income by 0.36. From this number, subtract all your existing monthly debt payments (car, student loans, minimum credit card payments, etc.). What remains is the maximum housing payment that keeps you within the 36% ceiling.
Step 4: Take the lower of the two numbers. The more conservative of your 28% limit and your adjusted 36% limit is your effective maximum monthly housing payment.
Step 5: Work backward to a home price. Use a mortgage calculator to find the maximum home price that keeps your monthly payment (at your expected rate and 20% down) within that limit.
Real-World Example
🏠 Example: The Johnson Family – $110,000 Combined Household Income
Step 1 – Gross monthly income: $110,000 ÷ 12 = $9,167/month
Step 2 – 28% housing limit: $9,167 × 0.28 = $2,567/month max PITI
Step 3 – 36% total debt limit: $9,167 × 0.36 = $3,300/month total. They have a $420/month car payment and $200/month in student loans = $620 in existing debt. $3,300 − $620 = $2,680/month available for housing
Step 4 – Take the lower number: $2,567 (28% limit) is lower than $2,680 (36% adjusted). So their effective maximum housing payment is $2,567/month.
Step 5 – Maximum home price: With 20% down at a 7% interest rate on a 30-year mortgage, a $2,567/month payment (including ~$400/month for taxes and insurance) supports roughly a $380,000–$400,000 home.
What Salary Do You Need? – Quick Reference Table
This table shows the maximum home price the 28/36 rule supports at various income levels, assuming 20% down, a 7% interest rate, 30-year term, and $400/month in taxes + insurance. Adjust using our mortgage calculator.
| Annual Income | Monthly Gross | 28% Max Payment | Max Home Price (est.) | 20% Down Required |
|---|---|---|---|---|
| $50,000 | $4,167 | $1,167/mo | ~$155,000 | $31,000 |
| $75,000 | $6,250 | $1,750/mo | ~$240,000 | $48,000 |
| $100,000 | $8,333 | $2,333/mo | ~$325,000 | $65,000 |
| $125,000 | $10,417 | $2,917/mo | ~$410,000 | $82,000 |
| $150,000 | $12,500 | $3,500/mo | ~$495,000 | $99,000 |
| $200,000 | $16,667 | $4,667/mo | ~$660,000 | $132,000 |
* Estimates based on 7% rate, 30-year term, 20% down, $400/mo taxes+insurance. Actual numbers vary.
Limitations of the 28/36 Rule
The 28/36 rule is a useful starting point, but it’s not perfect – and blindly following it can lead you astray in either direction.
It doesn’t account for the cost of living. In San Francisco or New York, spending 28% of a $150,000 income on housing might be unavoidable. In rural Arkansas, it might be wildly conservative. The rule was designed for average cost-of-living areas and needs local context to be meaningful.
It ignores savings goals. A household aggressively saving for retirement or their children’s education might want to keep housing costs at 20% or even 15% of gross income – well below the 28% cap – so that savings rate isn’t sacrificed to homeownership.
It doesn’t distinguish fixed vs. flexible expenses. A family with five children and high healthcare costs has far less flexibility than a childless couple with the same income. The 36% total debt limit doesn’t know the difference.
Lenders use DTI, not the 28/36 rule. Most lenders today use a Debt-to-Income (DTI) ratio, typically allowing up to 43–50% on the back end for conventional loans (and sometimes higher with compensating factors). This is significantly looser than the 28/36 rule – meaning you might qualify for more than the rule says you should take.
Other Affordability Guidelines
The 28/36 rule isn’t the only framework. Here are others worth knowing:
The 25% rule (Dave Ramsey). Dave Ramsey famously advocates spending no more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage. This is significantly more conservative than the 28/36 rule – it uses take-home pay and a shorter loan term – but it ensures you maintain financial flexibility and can pay off your home faster. If you use our mortgage payoff calculator, you’ll see how a 15-year term dramatically cuts total interest paid.
The 3x income rule. A simpler rule: don’t buy a home that costs more than 3 times your annual gross income. On a $100,000 salary, that’s a $300,000 home. This rule assumes a 20% down payment and a conventional 30-year mortgage. It produces slightly more conservative results than the 28/36 rule in low-rate environments.
The 2x income rule (ultra-conservative). Some financial advisors in high-cost-of-living areas recommend capping home purchases at 2x annual income with a significant down payment. This protects against rate increases on ARMs and life changes like job loss.
The 50/30/20 budget method. Applied to housing, this framework allocates 50% of after-tax income to all needs (housing, food, utilities, transportation). Housing specifically should fit within that 50% along with other necessities.
How to Improve Your Ratios Before Buying
If your numbers don’t work with the 28/36 rule today, here are concrete steps to improve them:
Pay down high-interest debt first. Eliminating a $500/month car payment frees up the full 8-point gap between the 28% and 36% ceilings – it directly expands how much you can put toward a mortgage within the 36% limit. Use our car payment estimator to understand your auto loan payoff timeline.
Save a larger down payment. More money down means a smaller loan, lower monthly payment, and potentially a better interest rate – all of which reduce your ratios. Going from 5% down to 20% down also eliminates PMI (private mortgage insurance), typically saving $100–$200/month.
Boost your income before buying. A raise, side income, or spouse returning to work meaningfully shifts what you can afford. Waiting 12 months after a job change or income increase also gives lenders a longer track record to evaluate.
Improve your credit score. A higher credit score earns you a lower mortgage rate. Dropping from 7.5% to 6.5% on a $350,000 mortgage saves about $230/month – which alone can determine whether you pass the 28% test.
Consider a less expensive home in the target neighborhood. A smaller home, a fixer-upper, or a home one neighborhood over can bring the price into range without sacrificing location entirely.
Ready to Run Your Numbers?
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