The 28% Rule: How Much House Can You Afford?

Most lenders follow the 28/36 rule: your total monthly housing cost (PITI) should not exceed 28% of your gross monthly income, and your total debt payments — housing plus car loans, student loans, credit cards, and child support — should not exceed 36%.

These are called the front-end (28%) and back-end (36%) ratios. They are the primary guardrails in mortgage underwriting. If you earn $96,000 per year ($8,000/month), the rule suggests a maximum PITI of $2,240 and maximum total debts of $2,880.

To turn the 28% rule into a home price, work backward. With $8,000 monthly income, your max PITI is $2,240. Subtract estimated taxes and insurance — say $400 for taxes and $150 for insurance — leaving about $1,690 for principal and interest. At 6.5% for 30 years, $1,690/month supports roughly a $267,000 loan.

Add your down payment to get the home price. With 20% down ($67,000), you are looking at about a $334,000 home. With 10% down, the loan is the same but PMI adds to PITI, which shrinks what you can borrow. Try your own numbers in our Mortgage Calculator.

The 36% back-end cap is often the binding constraint. If you have a $450 car payment and $400 in student loans, that is $850 of your $2,880 total-debt allowance gone — leaving only $2,030 for PITI, well below the $2,240 the front-end ratio would allow.

This is why paying down debts before applying can increase your buying power more than chasing a slightly higher income. Every $100 of monthly debt you eliminate frees up roughly $100 of PITI capacity under the back-end rule.

Just because a lender approves you for the 28% maximum does not mean you should spend it. The rule uses gross income — before taxes, retirement, and real-life expenses like childcare. Many financial planners suggest keeping housing under 25% of take-home pay for breathing room.

Consider your full picture: job stability, planned expenses, and how long you will stay. A payment that is comfortable for five years can become a burden if circumstances change. And remember that PITI can rise — taxes and insurance creep up even with a fixed rate, as explained in our PITI guide.

1. Calculate 28% of gross monthly income — that is your PITI ceiling.
2. Calculate 36% and subtract all monthly debts — that is your back-end PITI ceiling.
3. Use the lower of the two, subtract taxes, insurance, and PMI.
4. Convert the remainder to a loan amount with a mortgage calculator.
5. Add your down payment — and keep an emergency fund intact.