The 28/36 Rule: How Lenders Decide How Much You Can Borrow

Short answer: The 28/36 rule is the guideline lenders use to decide how large a mortgage you can afford. It says your monthly housing payment should stay at or below 28% of your gross monthly income, and your housing payment plus all other debt should stay at or below 36%. These two percentages — called your front-end and back-end debt-to-income ratios — are the single biggest factor in how much house a lender will approve you to buy.

Understanding this rule tells you your budget before you ever talk to a lender.

What the two numbers mean

The rule has two parts, and you have to pass both:

The 28% front-end ratio looks only at housing. Add up your expected monthly mortgage payment — principal, interest, property tax, homeowners insurance, and any PMI or HOA fees — and divide it by your gross (pre-tax) monthly income. Lenders want that number at 28% or below.

The 36% back-end ratio looks at your total debt. Take that same housing payment and add every other monthly debt obligation — car loans, student loans, minimum credit card payments, personal loans, child support. Divide by your gross monthly income. Lenders want that at 36% or below.

You have to satisfy both limits, and whichever one you hit first is the one that caps your budget.

A quick calculation

Suppose you earn $90,000 a year. Your gross monthly income is $7,500.

28% front-end: 0.28 × $7,500 = $2,100 maximum housing payment. 36% back-end: 0.36 × $7,500 = $2,700 maximum for housing plus all debt.

Now suppose you also pay $600 a month toward a car and student loans. Your back-end limit for housing becomes $2,700 − $600 = $2,100. In this case both limits land at $2,100, so that's your ceiling.

But if your other debt were $900 a month, your back-end housing limit would drop to $1,800 — and now the back-end ratio, not the front-end, is what caps you. This is exactly why reducing debt before buying can increase your borrowing power.

What counts as "debt" — and what doesn't

Lenders include recurring monthly obligations that appear on your credit report or that you're legally required to pay:

Car loans and leases Student loans Minimum credit card payments Personal and other installment loans Child support and alimony

They generally don't count everyday living expenses like groceries, utilities, phone bills, streaming subscriptions, or insurance premiums (other than the homeowners insurance built into your housing payment). That's an important distinction: the 28/36 rule measures debt, not your total cost of living. It's on you to make sure the payment you qualify for actually fits your real monthly budget.

Why lenders use it

The rule exists to protect both sides. For the lender, it lowers the odds you'll default. For you, it's a guardrail against buying more house than you can sustain. A payment that eats 45% of your income leaves almost nothing for savings, emergencies, or the ordinary costs of owning a home — which is how people end up "house poor," technically approved but financially stretched thin.

When lenders bend the rule

The 28/36 rule is a guideline, not an ironclad law. Depending on the loan program and your overall financial profile, lenders may approve higher ratios:

Conventional loans can sometimes go up to a 43% back-end ratio, and higher with strong compensating factors like excellent credit or large cash reserves. FHA loans are more flexible and may allow back-end ratios up to around 50% in some cases.

But being approved for a higher ratio doesn't mean you should borrow that much. The further you stretch beyond 36%, the less breathing room you have. Just because a lender will let you doesn't mean it's wise.

Calculate your own limit instantly

You don't have to run these percentages by hand. The free Home Affordability Calculator applies the 28/36 rule to your income, debts, down payment, and state, and shows your Safe (28/36), Stretch, and Maximum home prices — along with the debt-to-income ratio for each. It's the fastest way to see exactly where you stand before you start house hunting.

Frequently asked questions

What is a good debt-to-income ratio to buy a house? A back-end ratio at or below 36% is considered healthy and gives you the most comfortable budget. Many lenders will approve up to 43%, and some loan programs go higher, but lower is safer for your finances.

Does the 28/36 rule use gross or net income? Gross — your income before taxes and deductions. This is why the payment you qualify for can feel high relative to your take-home pay, and why it's important to sanity-check the payment against your actual monthly budget.

What if I hit the 28% limit but not the 36% limit? Then the 28% front-end (housing) limit caps your budget. This is common for buyers with little existing debt — housing is the binding constraint, and paying down debt won't raise your limit further.

Can I get a mortgage with a DTI over 43%? Sometimes. Certain FHA and other programs allow higher ratios with strong credit or reserves. But a high DTI means a tight monthly budget, so weigh the approval against whether the payment truly fits your life.

This article is for general educational purposes and is not financial advice. Lending guidelines and ratio limits vary by lender and loan program. Consult a licensed mortgage professional for figures specific to you.