How Much House Can You Actually Afford? The 28/36 Rule, Explained

Buying a home? Before you look at listings, run the numbers on what you can actually afford — not what the bank pre-approves you for.

The 28/36 rule in 30 seconds

Lenders use two debt-to-income ratios:

• Front-end DTI: your housing payment (principal + interest + taxes + insurance) should be at most 28% of your gross monthly income.
• Back-end DTI: ALL your debt payments (housing + car + student loans + credit cards) should be at most 36%.

Example: $7,000/month gross income -> housing payment target = $1,960 (28%). If you also pay $400/month in car and student loans, your max housing payment drops to $2,120 (36% back-end) — and the 28% cap wins at $1,960.

Why the rule matters

The 28% cap isn't about approval — it's about margin. Life happens: job changes, medical bills, surprise repairs. A payment that eats 40% of your income leaves almost no room to absorb those. Banks will lend you more than you should borrow; the rule keeps the decision in your hands.

Run your own numbers

Don't trust the calculator on the listing site — they assume a 20% down payment and often skip taxes and insurance. Punch in your real numbers instead:

1. Gross monthly income x 0.28 = your housing payment ceiling
2. Adjust loan amount, rate, and term until the payment lands at or under that ceiling

I use the free Loan Calculator for this — it shows the full amortization schedule and total interest, so you also see how much the house really costs over 30 years. No signup, and everything runs locally in your browser.

The takeaway

The 28/36 rule gives you a defensible, math-backed answer to "how much house can I afford" — before a realtor or lender tells you theirs. Run the numbers first, then go shopping.