The 28/36 Rule, Explained

Almost every "how much house can I afford" answer traces back to one guideline: housing costs under 28% of gross income, total debt under 36%. Here's where the rule comes from, exactly how to compute your own ratios, and the levers that move them.

The two ratios

Front-end (28%): your full monthly housing cost — principal, interest, property tax, homeowners insurance, and any PMI or HOA dues — divided by gross (pre-tax) monthly income. Back-end (36%): the same housing cost plus every other monthly debt obligation: car payments, student loans, minimum card payments, personal loans. Lenders check both; whichever is tighter caps your loan. The affordability calculator does this arithmetic backwards — from your income and debts to a maximum price.

Worked example

Gross income of $90,000 is $7,500/month. The 28% cap allows $2,100 for housing. If you also carry a $400 car payment and $100 in card minimums, the 36% cap allows $2,700 − $500 = $2,200 for housing — so here the front-end rule binds, and $2,100 is your ceiling. At recent rates, that supports roughly a $290,000 home with $40,000 down. Change the debts and the binding rule flips: at $900/month of other debt, the back-end cap of $1,800 takes over.

Is it a hard rule?

No — it's a guideline with official cousins. Conventional loans routinely approve back-end ratios into the low-to-mid 40s with strong credit and reserves; FHA can stretch further. But "approved" and "comfortable" are different claims: the 28/36 boundary is roughly where budgets keep room for maintenance (typically 1–2% of home value per year), savings, and surprises. Being approved at 45% back-end mostly proves the lender's risk is covered — yours isn't.

When your numbers don't fit

• Clear a debt, not a latte. Eliminating a $400 car payment frees $400 of monthly capacity under the back-end cap — often worth $60,000+ of house at current rates. Small expenses don't appear in DTI at all; monthly debt obligations do.
• Bigger down payment shrinks the loan the payment must cover, and at 20% removes PMI from the housing-cost side.
• Rate shopping moves the payment directly; even a quarter point matters at today's prices.
• Income documentation: lenders count what you can prove. Two years of history typically lets self-employment and bonus income into the calculation.