How Much House Can I Afford? The 28/36 Rule (2026)

The 28/36 rule in one paragraph

Lenders size your budget with two ratios. The front end ratio says your monthly housing payment (principal, interest, property tax, insurance, and any HOA dues) should not exceed 28 percent of your gross monthly income. The back end ratio says all your monthly debt payments together, housing plus car loans, student loans, credit card minimums, should not exceed 36 percent. The lower of the two numbers is your real ceiling.

Gross income means before tax. If you earn 90,000 dollars a year, that is 7,500 dollars a month, so the two caps are 2,100 dollars for housing and 2,700 dollars for total debt.

Turning the cap into a home price

The housing cap includes tax and insurance, not just the loan. Set those aside first, then work backward from what is left to the loan amount, then add your down payment to get the price.

Worked example (2026)

Gross monthly income$7,500
28 percent housing cap$2,100
Estimated tax + insurance$520 / mo
Budget left for principal + interest$1,580 / mo
Loan supported at 6.5 percent, 30 years≈ $250,000
With a 20 percent down payment≈ $312,000 home

Change any input and the ceiling moves: a bigger down payment, a lower rate, or paying off a car loan (which frees up back end room) all raise the price you can reach.

What the rule leaves out

The 28/36 rule is a lending guardrail, not a comfort test. It ignores a lot that matters to your actual budget:

Maintenance. Owners typically spend 1 to 2 percent of the home value a year on upkeep.
Closing costs. Usually 2 to 5 percent of the loan, due at signing on top of the down payment.
PMI. A down payment under 20 percent adds private mortgage insurance to the monthly payment.
Your goals. Borrowing the maximum leaves nothing for saving, travel, or a rainy day. Many buyers deliberately stay well under the cap.

A safe habit is to treat 28 percent as the ceiling and aim for a payment closer to 25 percent of gross income.

Frequently asked questions

Is the 28/36 rule based on gross or net income?

Gross income, meaning your pay before taxes and deductions. That is why the dollar caps feel generous compared to what actually lands in your bank account, and why aiming below the cap is sensible.

Does the housing number include property tax and insurance?

Yes. The 28 percent front end ratio covers the full housing payment: principal, interest, property tax, homeowners insurance, PMI if any, and HOA dues. It is not just the loan payment.

Can I get approved above 36 percent?

Sometimes. Many loan programs allow higher back end ratios, occasionally into the mid 40s, with a strong credit score, cash reserves, or a large down payment. Being approved for more does not mean it is comfortable to carry.

How does a bigger down payment change what I can afford?

It raises the price two ways: it shrinks the loan you need for a given payment, and once you reach 20 percent down it removes PMI, freeing more of the 28 percent cap for principal and interest.