The 28/36 rule is the most widely used guideline for home affordability. Here's what it means, how to apply it to your income, and how to calculate a realistic maximum home price.
One of the first questions every homebuyer asks is: how much house can I actually afford? It's tempting to take the maximum pre-approval amount and shop right up to that limit. But lenders approve loans based on what they're willing to risk — not necessarily what's comfortable for your household budget.
The 28/36 rule is the traditional guideline used by mortgage lenders and financial advisors to help buyers find a price range that leaves room to live. It uses two thresholds — a front-end ratio and a back-end ratio — both based on your gross monthly income.
The front-end ratio — sometimes called the housing ratio — limits how much of your gross monthly income can go toward your total monthly housing payment. That payment is your PITI: Principal, Interest, Taxes, and Insurance. If your down payment is less than 20%, PMI is also included in this calculation.
To find your maximum monthly PITI under the 28% rule, multiply your gross monthly income by 0.28.
Example: If your gross monthly income is $8,000, your maximum PITI is $8,000 × 0.28 = $2,240 per month.
The 28% limit applies to your full PITI, not just principal and interest. If your estimated property taxes and insurance add $500/month to your payment, then only $1,740 of your $2,240 maximum is available for principal and interest — which determines your actual maximum loan amount.
The back-end ratio — also called the total debt ratio — limits how much of your gross monthly income can go toward all monthly debt obligations combined. This includes your PITI plus every other recurring debt payment: car loans, student loans, personal loans, credit card minimum payments, child support, and alimony.
To find your maximum total monthly debt under the 36% rule, multiply your gross monthly income by 0.36. Then subtract your existing monthly debt payments to find how much is left over for housing.
Example: Gross monthly income is $8,000. Maximum back-end debt is $8,000 × 0.36 = $2,880. If you have $600/month in existing debt payments (car + student loans), your maximum PITI is $2,880 − $600 = $2,280 per month.
In practice, you apply both rules and use whichever gives you the lower maximum. Both the front-end and back-end limits must be satisfied.
From this $2,000 maximum, subtract estimated property taxes ($350/month) and homeowner's insurance ($150/month). That leaves $1,500/month for principal and interest, which corresponds to roughly a $250,000 loan at a 6% interest rate over 30 years.
| Annual Income | Monthly Income | 28% Max PITI | Max P&I (after taxes/ins.) | Approx. Loan Amount* |
|---|---|---|---|---|
| $60,000 | $5,000 | $1,400 | $900 | ~$150,000 |
| $80,000 | $6,667 | $1,867 | $1,367 | ~$228,000 |
| $100,000 | $8,333 | $2,333 | $1,833 | ~$305,000 |
| $120,000 | $10,000 | $2,800 | $2,300 | ~$383,000 |
| $150,000 | $12,500 | $3,500 | $3,000 | ~$500,000 |
*Estimates assume $500/month combined taxes and insurance, no existing debt, and a 6% example rate over 30 years. Your actual loan amount will depend on your specific rate, taxes, insurance, and debt load.
DTI ratios are one piece of the approval picture. Lenders also weigh:
Yes — and many buyers do. The 28/36 rule is a guideline, not a hard regulatory cap. Conventional loans backed by Fannie Mae allow back-end DTI up to 45–50% with strong compensating factors. FHA guidelines permit back-end DTI up to 43%, or even higher in certain circumstances.
The question isn't only whether you can qualify — it's whether a higher payment is financially sustainable for your specific household. Stretching your DTI means less cushion for job disruptions, medical expenses, home repairs, and other unexpected costs. Many financial planners suggest treating the 28/36 rule as a ceiling, not a target, and aiming for 25/33 or lower if possible.
Lenders pre-approve you based on the maximum they're willing to lend. That number is not a recommendation for how much you should spend. Many buyers find that housing costs at 22–25% of gross income leave significantly more room for savings, investing, and unexpected expenses.
Once you know your maximum PITI, here's how to convert it to a target home price:
Enter your income, debts, and down payment to see your personalized affordability estimate using the 28/36 rule.
Try the Free Affordability Calculator →