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

When you ask “how much house can I afford,” a lender doesn’t ask what you want to spend — it runs two ratios against your income. Together they’re called the 28/36 rule, and they turn your paycheck into a home-price ceiling. Understanding them tells you what you’ll be approved for and whether you should borrow that much.

The two ratios

Lenders measure affordability with your debt-to-income (DTI) ratio — the share of your gross monthly income eaten by debt payments. The 28/36 rule sets two caps:

• Front-end ratio — 28%. Your monthly housing payment (the full PITI: principal, interest, taxes and insurance, plus HOA) should stay under about 28% of gross monthly income.
• Back-end ratio — 36%. All your monthly debt payments together — housing plus car loans, student loans and minimum credit-card payments — should stay under about 36%.

Your ceiling is whichever produces the lower housing budget.

A worked example

Say you earn $8,000/month gross and pay $500/month in other debts:

• Front-end: 0.28 × $8,000 = $2,240 for housing.
• Back-end: 0.36 × $8,000 = $2,880 for all debt, minus the $500 you already owe = $2,380 left for housing.

The lower of the two is $2,240/month — your maximum housing payment. Notice the lever: if you had $1,500 of other debts, the back-end limit would drop to $2,880 − $1,500 = $1,380, and that would become your ceiling. Paying down debt directly raises how much house you can afford.

From payment to price

The $2,240 is a payment, not a price. To get the price:

1. Subtract estimated monthly property tax, insurance and HOA — those are part of the payment but not the loan.
2. The rest is your affordable principal-and-interest payment; run it backwards through the mortgage formula (at today’s rate and term) to get the loan amount you can carry.
3. Add your down payment. Home price = affordable loan + down payment.

The home affordability calculator does all of this — enter your income, debts, down payment and rate and it returns the home price, loan and monthly payment you qualify for, and tells you which ratio is limiting you. Then the mortgage calculator breaks the actual payment down with a full amortization schedule.

A ceiling, not a target

Two cautions the ratios hide:

• It’s gross income. The 28/36 limits use pre-tax income, so a payment right at the 28% ceiling can feel heavy against your take-home pay.
• It’s a maximum. Lenders may even approve more, but “can borrow” isn’t “should borrow.” Buying below the ceiling leaves room for savings, an emergency fund, rate changes and the surprise costs every homeowner meets.

A useful sanity check alongside it: run the payment through a 50/30/20 budget — if housing alone blows past the “needs” half of your take-home pay, the mortgage may qualify on paper but strain real life.

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The 28/36 rule is a widely-used lender guideline, not a guarantee of approval — actual underwriting varies with credit, reserves, loan type and lender. Ratios use gross income. This is educational information, not financial advice or a pre-approval. Sources: standard mortgage debt-to-income guidelines (Fannie Mae / CFPB).