How Much House Can I Afford? The 28/36 Rule Explained
- Lenders cap your housing payment at about 28% of gross monthly income and all debt payments at about 36% (sometimes up to 43–50%).
- On a $100,000 income with $600/month of other debt, that supports roughly a $2,333 monthly housing payment — about a $370,000 loan at 6.5% over 30 years.
- Taxes, insurance, PMI, and HOA all count toward the 28%, so the real maximum price is usually 10–20% lower than the headline figure.
- The lender's maximum is a ceiling, not a goal. Most planners suggest staying well under it.
"How much house can I afford?" is the first real question in any home search, and it has a more precise answer than most people expect. Lenders don't guess — they apply two debt-to-income ratios to your paperwork and the math falls out. Understanding those ratios lets you run the numbers yourself before you ever talk to a bank, and, more importantly, lets you decide how far below the maximum you want to be.
The two ratios lenders actually use
Mortgage underwriting leans on a pair of percentages known together as the 28/36 rule:
- Front-end ratio (28%). Your total monthly housing cost — mortgage principal and interest, property tax, homeowners insurance, PMI if any, and HOA dues — should not exceed about 28% of your gross (pre-tax) monthly income.
- Back-end ratio (36%). All of your monthly debt payments — housing plus car loans, student loans, credit card minimums, child support — should not exceed about 36% of gross monthly income.
Whichever ratio is more restrictive sets your limit. A borrower with no other debt is capped by the 28% front-end number; a borrower carrying a car payment and student loans is usually capped by the 36% back-end number, because the other debts eat into the room left for housing.
These are the conservative, traditional thresholds. Conventional loans backed by Fannie Mae and Freddie Mac often allow back-end ratios up to 43%, and as high as 50% with strong compensating factors (excellent credit, large reserves). FHA loans go to similar levels. But "allowed" and "comfortable" are different things, as we'll see.
A worked example: $100,000 income
Take a household earning $100,000 a year — $8,333 per month gross — with $600 a month of existing debt (a car payment and a student loan), $40,000 saved for a down payment, shopping at a 6.5% rate on a 30-year fixed mortgage.
| Step | Calculation | Result |
|---|---|---|
| Front-end limit | 28% × $8,333 | $2,333 / month |
| Back-end limit | 36% × $8,333 − $600 debts | $2,400 / month |
| Binding limit | the smaller of the two | $2,333 / month |
| Loan that payment supports | at 6.5%, 30 years (P&I only) | ≈ $369,000 |
| Maximum price | loan + $40,000 down | ≈ $409,000 |
So the headline answer is about $409,000. But notice the asterisk on "P&I only." That $2,333 has to cover property tax and insurance too. In a typical market, taxes and insurance might run $500–$700 a month on a home that price, leaving only about $1,650–$1,850 for principal and interest. That supports a loan of roughly $260,000–$290,000 — a realistic maximum price closer to $300,000–$330,000. Put more down, or have less other debt, and the number rises.
Our house affordability calculator runs exactly this sequence for your own income, debts, down payment, and rate.
What moves the number most
Three levers dominate:
- Interest rate. On a 30-year loan, each full percentage point of rate changes the loan a given payment supports by roughly 10%. The $2,333 payment supports about $369,000 at 6.5% but about $410,000 at 5.5% and $333,000 at 7.5%. This is why buyers watch rates so closely.
- Existing debt. Every $100 of monthly debt payments reduces your back-end room by $100 — which at 6.5%/30 years is about $16,000 of loan. Paying off a $300 car payment before applying can add nearly $50,000 of buying power.
- Down payment. It adds directly to price, and at 20% or more it eliminates PMI — which otherwise counts against your 28% and can cost $150–$400 a month. Our down payment calculator shows the loan-to-value math.
Why you probably shouldn't buy at the maximum
The 28/36 rule is about the lender's risk, not your life. It is calibrated to keep default rates acceptable across millions of loans — not to leave you with room for a roof replacement, a job change, a baby, or a rate increase if you ever need to refinance. Gross income also overstates what you have: after taxes and retirement contributions, 28% of gross is often 38–40% of take-home.
A common planner's rule is to keep housing at or below 25% of take-home pay, or to buy at no more than about 80% of what the lender approves. Buying below the limit also gives you the option to make extra principal payments — see our mortgage payoff calculator for how much that saves.
Rent or buy?
Affordability is only half the question. If you may move within 3–5 years, the transaction costs of buying (2–5% to buy, 6–8% to sell) can outweigh equity gains. Our rent vs buy calculator compares the two paths for your numbers and time horizon.
The short version
Multiply your gross monthly income by 0.28 and by 0.36, subtract your other debt payments from the second figure, and take the smaller result — that's your maximum monthly housing cost. Convert it to a loan at today's rate (the mortgage calculator will do it), remember that taxes and insurance come out of the same budget, add your down payment, and then aim comfortably below the result.
Common questions
How much house can I afford on $60,000, $80,000, or $150,000 a year?
Using the 28% front-end limit, a 6.5% rate, a 30-year term, and a 10% down payment with taxes and insurance budgeted at roughly 25% of the housing payment: about $60,000 of income supports a home around $190,000–$210,000; $80,000 supports roughly $255,000–$280,000; $150,000 supports about $480,000–$525,000. Other debt, a bigger down payment, or a different rate shifts these meaningfully — run your own figures in the calculator.
Does the 28/36 rule use gross or net income?
Gross (pre-tax) income. That's worth remembering, because 28% of gross is a much larger share of what actually hits your bank account — often 35–40% of take-home once taxes and retirement contributions are out. This is one reason many planners suggest a stricter personal limit, such as 25% of net pay.
What counts as "debt" in the back-end ratio?
Recurring monthly obligations that appear on your credit report or court records: car loans, student loans, personal loans, minimum credit card payments, child support and alimony, and the new housing payment itself. Utilities, phone bills, insurance, groceries, and subscriptions do not count — which is another reason the lender's limit can feel tighter in real life than on paper.
Can I exceed the 28/36 limits?
Often, yes. Many lenders approve back-end ratios of 43%, and automated underwriting can go to 45–50% with strong credit, cash reserves, or a large down payment. But approval and affordability are different questions; the higher your ratio, the thinner your cushion for anything going wrong.
Does a higher credit score increase how much I can afford?
Indirectly but significantly. A better score earns a lower interest rate, and rate is the single biggest lever on how much loan a given payment supports — roughly 10% of buying power per percentage point. Moving from a 6.9% to a 6.1% rate on the same payment can add $25,000–$30,000 of house.
Run your own numbers. The affordability calculator applies the 28/36 rule to your income, debts, and rate in seconds.
Open the House Affordability Calculator →