What Is the 28/36 Rule? Mortgage Affordability by Income

Short answer: the 28/36 rule says your monthly housing costs should be no more than 28% of your gross (pre-tax) monthly income, and all your monthly debt payments together, housing included, should be no more than 36%. On a $100,000 salary, that means a housing payment up to about $2,333 a month and total debt payments up to $3,000.

Lenders, real estate agents, and financial planners use the rule as a quick test of whether a mortgage fits your income. This guide shows how to calculate it, what it allows at different incomes, and when to aim lower.

What the 28 and the 36 mean

Both numbers are debt-to-income (DTI) ratios: a monthly payment divided by your gross monthly income.

• 28% is the front-end ratio. It covers only your housing payment: mortgage principal and interest, property taxes, homeowners insurance, and any HOA dues or mortgage insurance (PMI). Lenders often call this PITI.
• 36% is the back-end ratio. It covers your housing payment plus every other monthly debt payment that shows up on your credit report or loan application.

Your budget has to pass both tests. Whichever limit is lower is the most you should spend on housing.

What counts as debt for the 36%

• Car loan and lease payments
• Student loan payments
• Minimum credit card payments
• Personal loan payments
• Child support or alimony you pay

Everyday living costs like groceries, utilities, phone bills, car insurance, and childcare are not included, even though you still have to pay them. That's one reason the rule can feel generous for some households.

How to calculate the 28/36 rule

1. Find your gross monthly income. Divide your yearly pre-tax income by 12. A $72,000 salary is $6,000 a month.
2. Multiply by 0.28 for your housing limit: $6,000 × 0.28 = $1,680.
3. Multiply by 0.36 for your total debt limit: $6,000 × 0.36 = $2,160.
4. Subtract your other debts from the 36% limit. With a $350 car payment and a $250 student loan, $2,160 − $600 = $1,560 is left for housing.
5. Use the lower number. Here the 36% test is tighter, so the housing budget is $1,560 a month, not $1,680.

That $1,560 has to cover taxes and insurance as well as the loan payment. Plug it into our mortgage calculator to see which home price and down payment produce that total.

28/36 rule by income

Here is what the rule allows at common incomes if you have no other debts. The home price column is a rough estimate assuming 20% down, a 30-year fixed mortgage at 6.5%, and property taxes plus insurance of about 1.5% of the home's price per year.

If you already have $500 a month in other debt

Existing debt changes the picture, especially at lower incomes, where the 36% limit becomes the tighter one:

At $50,000 a year, a $500 car payment cuts the housing budget from $1,167 to $1,000 and the price range by about $26,000. From $75,000 up, the 28% limit is the tighter one, so $500 of debt doesn't change the result.

What income do you need for a home?

Working backward, here's the salary needed to keep the housing payment at 28% of gross income, with the same assumptions and no other debts:

A higher rate, smaller down payment, PMI, HOA dues, or high property taxes all raise the income you need. In Texas, for example, property taxes are among the highest in the country, often around 1.5% to 2% of a home's value, so check local rates. Our mortgage calculator can estimate property tax from your ZIP code.

Do lenders really use 28/36?

It's a guideline, not a law, and many loans allow higher ratios. Typical limits look like this, though each lender and situation is different:

• Conventional loans often allow a back-end ratio up to about 45%, and sometimes up to 50% for borrowers with strong credit and savings.
• FHA loans use a 31/43 guideline, with exceptions possible above that.
• VA loans focus on a 41% back-end ratio along with a separate check of the money left over each month.

So you may be approved for more than 28/36 allows. That doesn't mean you should borrow it. The rule's real value is as a limit that leaves room for saving, repairs, and surprises.

When to aim lower than 28/36

The rule uses gross income, but you pay bills with take-home pay after taxes, retirement contributions, and health insurance. A 28% housing payment can easily be 35% to 40% of what actually lands in your bank account. Consider staying below the rule if you:

• Have high childcare, medical, or commuting costs
• Earn irregular income from commissions, tips, or freelancing
• Don't yet have an emergency fund of 3 to 6 months of expenses
• Want to save aggressively for retirement or college
• Are buying an older home that may need repairs

A good test is to build a monthly budget with the new housing payment and check that you can still save at least 10% to 20% of your income.

How to improve your ratios

• Pay off a small debt. Clearing a $200-a-month car loan frees up $200 of your 36% limit right away.
• Make a bigger down payment. Borrowing less lowers the monthly payment and can remove PMI once you reach 20% down.
• Improve your credit score. A lower interest rate means a smaller payment on the same loan.
• Avoid new credit before applying. A new car loan or store card can push your back-end ratio over a lender's limit.
• Shop for insurance and compare lenders. Small savings on every monthly cost add up in the front-end ratio.

Frequently asked questions

Is the 28/36 rule based on gross or net income?

Gross income, meaning your pay before taxes and deductions. That's how lenders calculate debt-to-income ratios.

Does the 28% include property taxes and insurance?

Yes. The 28% covers your whole housing payment: principal, interest, property taxes, homeowners insurance, and HOA dues or mortgage insurance if you have them.

What is the 28% rule for a mortgage?

It's the first half of the 28/36 rule: keep your total monthly housing payment at or below 28% of your gross monthly income. On $6,000 a month, that's $1,680.

Does the 28/36 rule apply to renters?

Not formally, but a similar guideline suggests keeping rent at about 30% of gross income. Landlords often check that your income is at least three times the rent, which works out to about 33%.

Is 28/36 still realistic?

In high-cost areas, many buyers spend more than 28% on housing, and lenders often allow it. It's still a useful target. The further above it you go, the less room you have for savings and unexpected costs.

For a step-by-step walk through choosing a price range, including closing costs and other expenses people forget, read how much house can I afford. Then try your own numbers in the mortgage calculator.