How much house can I afford? The 28/36 rule explained (US)

"How much house can I afford?" is the first question every US buyer asks, and the most commonly mis-answered. A lender will tell you the largest loan they're allowed to give you. That's a ceiling, not a recommendation. The classic rule of thumb for finding a number you can actually live with is the 28/36 rule.

The 28/36 rule in one line

Spend no more than 28% of your gross monthly income on housing, and no more than 36% on all debt combined: housing plus car loans, student loans, credit cards and any other minimum payments.

"Gross" means before tax. "Housing" means your full PITI payment (Principal, Interest, Taxes and Insurance), not just principal and interest. That distinction trips up a lot of first-time buyers.

Front-end vs back-end DTI

Lenders express the same idea as two debt-to-income (DTI) ratios:

Front-end DTI: housing costs ÷ gross monthly income. The 28% half of the rule.
Back-end DTI: all monthly debt payments ÷ gross monthly income. The 36% half.

The back-end ratio is usually the one that bites, because it includes everything. Two buyers with identical salaries can afford very different houses if one of them is carrying a $500 car payment and $400 in student loans.

Worked example

Say your household earns $7,000 a month gross.

28% front-end: 0.28 × $7,000 = $1,960 a month for housing (full PITI).

36% back-end: 0.36 × $7,000 = $2,520 a month for all debt.

Now suppose you already pay $560 a month on a car and student loans. That leaves $2,520 − $560 = $1,960 for housing, so the back-end limit lands in exactly the same place as the front-end one. But if your other debts were $900 a month, your housing budget would drop to $1,620, even though your income hasn't changed. Pay down debt before you shop, and you raise your housing ceiling without earning a dollar more.

Why taxes and insurance shrink your budget

The 28% cap is on the whole housing payment, so the more your local property tax and insurance cost, the less is left for principal and interest, which means a smaller loan and a cheaper home. A buyer in a low-tax county can afford noticeably more house than a buyer with the same income in a high-tax one. (We break this down in our guide on how property tax changes your payment by state.)

PMI: the cost of putting down less than 20%

Put down less than 20% on a conventional loan and the lender adds private mortgage insurance (PMI), typically a few hundred dollars a month, until you build 20% equity. PMI counts toward your 28% housing cap, so a smaller down payment doesn't just mean a bigger loan; it eats into the very budget you're trying to stretch.

Stress test before you commit

Rules of thumb assume today's rate. Before you commit, add 1–2 percentage points to the rate you're quoted and recalculate. If the higher payment still fits inside 28%, you've got breathing room. If it doesn't, you're relying on rates never moving against you, and over a 30-year loan, they will.

Common mistakes

Treating the lender's maximum as a target. Pre-approval tells you the most you can borrow, not the most you should.

Using principal and interest only. Always budget full PITI. Taxes and insurance can add 20–35% on top of the bare loan payment.

Ignoring the back-end ratio. Your existing debts quietly lower your housing budget. Clear what you can first.

Forgetting closing costs and reserves. Budget 2–5% of the price for closing costs, and keep several months of payments in cash after you close. The down payment shouldn't empty your savings.