How Much House Can I Afford? The 28/36 Rule Explained

Buying a home is usually the biggest purchase of your life, so the question isn't just "how much will a bank lend me?" but "how much can I comfortably pay every month?" Those can be very different numbers. This guide walks through how lenders think about affordability and how to find a price that fits your real budget.

The 28/36 rule

Many lenders start with a simple guideline based on your gross (pre-tax) monthly income:

• 28% — your total housing payment (principal, interest, property taxes, homeowners insurance, and any HOA or PMI) should be no more than 28% of gross monthly income.
• 36% — all of your monthly debt payments combined (housing plus car loans, student loans, credit card minimums, etc.) should be no more than 36%.

These percentages are called your debt-to-income ratios. Some loan programs allow higher ratios, but staying near 28/36 leaves room for savings, emergencies, and everyday life.

A worked example

Say your household earns $90,000 a year, or $7,500 a month before taxes, and you have a $400 car payment.

1. Housing limit: 28% × $7,500 = $2,100 per month.
2. Total debt limit: 36% × $7,500 = $2,700. Subtract the $400 car payment and you have $2,300 available for housing. The lower of the two numbers, $2,100, is your target.
3. Subtract estimated property taxes and insurance — say $550 a month — leaving about $1,550 for principal and interest.
4. At a 6.5% rate on a 30-year loan, $1,550 a month supports a loan of roughly $245,000.
5. With a 10% down payment, that points to a home price of about $272,000.

Change any input — a lower rate, a bigger down payment, or higher property taxes — and the answer shifts. That's why it helps to test several scenarios in a mortgage calculator.

Costs people forget

• Closing costs, typically 2%–5% of the loan amount.
• PMI if you put down less than 20% on a conventional loan.
• Maintenance — a common rule of thumb is to budget 1%–2% of the home's value each year for repairs.
• Higher utilities, furniture, and moving costs.
• Property tax increases after a reassessment.

Approved vs. comfortable

Lenders look at gross income, but you pay bills with take-home pay. If you have childcare costs, irregular income, or big savings goals, you may want a payment well below what you are approved for. A good test: build a monthly budget with the new housing payment and check that you can still save at least 10%–20% of your income.

Ways to afford more house

• Pay down other debts to lower your debt-to-income ratio.
• Improve your credit score to qualify for a lower rate.
• Save a larger down payment to borrow less and avoid PMI.
• Compare offers from at least three lenders.

The bottom line

Use the 28/36 rule as a starting point, include every cost of ownership, and choose a payment that still lets you save. A home you can comfortably afford is far less stressful than the most expensive home you can qualify for.