The 28/36 rule is the most common starting point for how much of your income can go to a mortgage. It is two ratios, both measured against gross monthly income:
- 28% front-end ratio: total housing cost — principal, interest, property tax, homeowners insurance, HOA dues and mortgage insurance — should be at most 28% of gross monthly income.
- 36% back-end ratio: housing plus every other monthly debt payment should be at most 36%.
Your budget is whichever limit is lower. With few debts the 28% limit usually binds; with a car loan and student loans the 36% limit often takes over.
Worked example
A household earns $84,000 a year, or $7,000 a month. The 28% limit is $1,960 and the 36% limit is $2,520.
- With no other debts, the housing limit binds: about $1,960 a month. With $35,000 down at an example 6.5% for 30 years, 1.1% property tax and $1,800 of yearly insurance, that supports a price of about $267,286.
- With $900 of monthly debts, the back-end limit leaves $1,620 for housing, lower than $1,960, so it binds. The price that fits drops to about $222,864.
Paying off that $900 of debts would raise the affordable price by about $44,421 — often a bigger effect than a raise.
Why lenders use two ratios
The front-end ratio checks the house alone; the back-end ratio checks whether the whole debt load is sustainable. A buyer with no debts but a large payment and a buyer with a modest payment and heavy debts can both be stretched, and each ratio catches one of them.
When the limits are different
28/36 is a guideline, not a regulation. Loan programs publish their own debt-to-income limits, and automated underwriting can approve higher ratios for borrowers with strong credit, cash reserves or larger down payments. Being approved at a higher ratio does not make the payment comfortable, though. DTI ignores taxes, retirement saving, childcare and repairs, so many buyers choose to stay at or below 28% even when approved for more.
Using the rule with your numbers
The affordability calculator applies both ratios, lets you change them (try 25% for a conservative budget), and solves for the price including taxes, insurance and PMI. For quick reference by income, see the salary tables, such as $75k or $100k.