One of the very first questions every home buyer faces is also one of the hardest to answer honestly: how much house can I actually afford? Lenders will often approve you for more than you should comfortably spend, so relying on their maximum number alone is a common — and costly — first-time buyer mistake.
The 28/36 Rule
Most mortgage lenders and financial advisors use a guideline called the 28/36 rule to assess affordability:
- 28% rule: Your total housing payment (PITI — principal, interest, taxes, insurance) should not exceed 28% of your gross monthly income.
- 36% rule: Your total debt payments — including housing, car loans, student loans, and credit cards — should not exceed 36% of your gross monthly income.
These two ratios are often referred to together as your front-end ratio (28%) and back-end ratio (36%), and lenders calculate both when evaluating your application.
A Practical Example
Say your household earns $90,000 per year, or $7,500 per month gross income.
- 28% of $7,500 = $2,100 maximum recommended housing payment
- 36% of $7,500 = $2,700 maximum recommended total debt payment
If you already pay $400/month toward a car loan and $150/month toward student loans, that’s $550 in existing debt. Subtracting that from your $2,700 back-end limit leaves $2,150 available for housing — which is actually slightly below your front-end limit of $2,100 in this case, meaning your existing debt is the more binding constraint.
This is exactly why both ratios matter: a low front-end ratio doesn’t guarantee approval if your back-end ratio is too high.
Use the Calculator, Not Guesswork
Manually running these percentages is useful for understanding the concept, but our free Affordability Calculator does the full calculation instantly — including your existing debts — and gives you direct feedback on whether you’re within recommended limits. It’s the fastest way to get a realistic home price range before you start browsing listings.
Once you have a target home price, plug it into our Mortgage Calculator to see your full estimated PITI payment, including property taxes and insurance — not just principal and interest.
Why Lenders Sometimes Approve You for More
Many conventional loan programs allow back-end ratios up to 43%, and some government-backed loans (FHA, VA) allow even higher ratios in certain circumstances. This means a lender might approve you for a payment well above the conservative 28/36 guideline.
Just because you can qualify for a higher payment doesn’t mean you should take it. A higher housing payment leaves less room for retirement savings, emergencies, home maintenance, and the normal cost-of-living increases that happen over a 30-year mortgage term.
Factors the 28/36 Rule Doesn’t Capture
The 28/36 rule is a useful starting point, but it doesn’t account for everything in your personal financial picture:
- Job stability and income type. Commission-based or variable income may warrant a more conservative ratio than the guideline suggests.
- Other financial goals. If you’re aggressively saving for retirement, a child’s education, or another major goal, you may want a lower housing ratio to keep those contributions on track.
- Maintenance and repair costs. Homeownership comes with ongoing costs — roof repairs, HVAC replacement, landscaping — that renting doesn’t. Many financial planners recommend budgeting 1–2% of your home’s value annually for maintenance, on top of your mortgage payment.
- Regional cost of living. A 28% housing ratio feels very different in a high cost-of-living city versus a rural area, even at the same income level.
A Simple Three-Step Process
- Calculate your true gross monthly income (before taxes), including any reliable secondary income.
- List your existing monthly debt obligations — car loans, student loans, credit card minimums, personal loans.
- Run both numbers through our Affordability Calculator to see your maximum recommended home price and monthly payment side by side.
Knowing this number before you start touring homes with a real estate agent protects you from falling in love with a house that stretches your budget too thin. It also gives you a concrete, defensible number when negotiating your offer.
For additional federal guidance on responsible home buying and affordability, see the U.S. Department of Housing and Urban Development’s homebuyer resources.