What is the 28/36 rule?
The 28/36 rule is a guideline used by US mortgage lenders and financial planners. It says a household should spend:
- No more than 28% of gross monthly income on housing costs — mortgage principal and interest, property tax, homeowners insurance, mortgage insurance and HOA fees. This is the front-end ratio.
- No more than 36% of gross monthly income on all debt payments combined — housing plus car loans, student loans, credit card minimums and other loans. This is the back-end ratio, also called debt-to-income or DTI.
Your budget is set by whichever limit is reached first.
How to calculate it
Max housing payment = min( income × 0.28 , income × 0.36 − other debts )
All figures are monthly. Once you know the maximum housing payment, subtract property tax, insurance and HOA fees to find how much is left for principal and interest, then work out the loan that payment supports. Our affordability calculator does all of these steps instantly.
Worked examples
Example 1: few debts
Gross income $8,000 a month, debts $300. Front-end limit: $2,240. Back-end limit: $2,880 − $300 = $2,580. The front-end limit is lower, so the maximum housing payment is $2,240.
Example 2: significant debts
Gross income $8,000 a month, debts $1,000 (a car loan and student loans). Front-end limit: $2,240. Back-end limit: $2,880 − $1,000 = $1,880. Now the back-end limit binds, and the maximum housing payment falls to $1,880 — about 16% less house for the same income.
Other affordability rules
| Rule | Housing limit | Total debt limit |
|---|---|---|
| US conventional (28/36) | 28% | 36% |
| US FHA guideline | 31% | 43% |
| Canada GDS / TDS | ~39% | ~44%, at the stress-test rate |
| UK | Loan typically capped at ~4–4.5× income, plus an affordability check | |
The 35/45 model is another popular rule of thumb: total debt up to 35% of gross income or 45% of take-home pay. Conservative planners sometimes suggest keeping housing at 25% of take-home pay instead.
Is the 28/36 rule still realistic?
In high-cost cities, many buyers stretch beyond 28% for housing, and lenders often allow it. But the rule exists for a reason: housing that eats a large share of income leaves less for retirement savings, emergencies and repairs. If your budget only works at the very top of the limits, consider a larger down payment, paying off a car loan first, or a less expensive area.