Last updated: March 2026
The 28/36 Rule: How Lenders Decide What You Can Afford
The 28/36 rule is the most widely used guideline for determining how much house you can afford. It sets two limits on your debt relative to your gross (pre-tax) income.
The front-end ratio (28%) limits your total housing payment — principal, interest, taxes, insurance, PMI, and HOA — to no more than 28% of gross monthly income. If you earn $7,000/month gross, your max housing payment should be $1,960.
The back-end ratio (36%) limits your total debt payments — housing plus car loans, student loans, credit card minimums, and other debts — to 36% of gross income. With $7,000/month income and $500 in existing debts, your max housing is $2,520 minus $500 = $2,020.
Your effective maximum is the lower of the two calculations. Existing debts can significantly reduce what you can afford. Someone earning $85,000 with no debts can afford about $385,000. The same income with $800/month in debts might only support a $310,000 home.
These are guidelines, not hard limits. Some lenders approve loans at higher DTI ratios (up to 43-50%), especially for FHA and VA loans. But just because you can borrow that much does not mean you should. The 25% "comfortable" tier leaves room for savings, emergencies, and the unexpected costs of homeownership — repairs, maintenance, and upgrades that never stop.
A common mistake first-time buyers make is calculating affordability based on pre-approval amounts rather than personal budgeting. Banks approve based on what you can technically repay, not what leaves you financially comfortable. Always budget from your actual monthly expenses, not just the ratios.
Frequently Asked Questions
How much house can I afford on $100,000 salary?
Using the 28% DTI rule, your max housing payment is $2,333/month ($100K ÷ 12 × 0.28). At 6.75% for 30 years with 20% down, that supports a home around $400,000-$430,000 depending on local taxes and insurance. With 10% down and PMI, the range drops to $350,000-$380,000.
What is the 28/36 rule?
The 28/36 rule is a guideline lenders use. The 'front-end ratio' (28%) means your total housing payment (PITI) should not exceed 28% of gross monthly income. The 'back-end ratio' (36%) means total debt payments (housing + car + student loans + credit cards) should not exceed 36% of gross income.
What is DTI and why does it matter?
Debt-to-Income ratio (DTI) compares your monthly debt payments to gross income. Lenders use it to determine how much they'll lend you. Most conventional loans require DTI under 43-45%. FHA loans may allow up to 50%. Lower DTI means easier approval and often better rates.
Should I buy at my maximum affordability?
Most financial advisors say no. The 28% DTI 'maximum' leaves little room for savings, emergencies, or lifestyle expenses. The 25% 'comfortable' level gives you breathing room. Consider future expenses (children, job changes, repairs) before committing to your maximum.
How does my down payment affect affordability?
A larger down payment reduces the loan amount, lowering your monthly payment. It also eliminates PMI at 20%+, further reducing costs. With $50,000 down, you need to borrow less — but the down payment itself comes from savings you could otherwise invest.
Do lenders use the same affordability calculation?
Lenders use similar DTI ratios but may have different thresholds. Conventional loans typically cap at 43-45% back-end DTI. FHA may go to 50%. VA loans have no fixed DTI cap but typically require compensating factors above 41%. Each lender also considers credit score, employment history, and reserves.