The 28/36 rule says housing costs should stay under 28% of gross monthly income, and all debts combined under 36%. On a $100,000 salary, housing is capped at $2,333.33 a month — supporting a loan of about $290,053 and a $362,566 home with 20% down.
The rule is a guideline lenders have used for decades, not a law — but it is the fastest honest answer to the affordability question, and it protects you from buying a house that eats your whole paycheck. This guide works the rule through with real numbers, shows the salary table, and explains what to do when the rule says less than you hoped.
What Is the 28/36 Rule?
The rule has two parts, both measured against your gross monthly income — your pay before taxes:
- The 28% front-end ratio. Your total monthly housing cost — principal, interest, taxes, insurance, PMI, and HOA dues — should be no more than 28% of gross monthly income.
- The 36% back-end ratio. Your housing cost plus all other monthly debt payments — car loans, student loans, credit-card minimums — should be no more than 36% of gross monthly income.
Lenders call these the front-end and back-end debt-to-income (DTI) ratios. Both must pass: a borrower with no other debts can stretch the front-end number, while heavy car and student payments can fail the back-end test even on a modest house.
Worked Example: A $100,000 Salary
Take a household earning $100,000 a year. Here is the 28/36 rule, step by step.
Step 1: Find the gross monthly income.
$100,000 ÷ 12 = $8,333.33 a month.
Step 2: Apply the 28% front-end cap.
$8,333.33 × 0.28 = $2,333.33 a month for all housing costs.
Step 3: Apply the 36% back-end cap.
$8,333.33 × 0.36 = $3,000.00 a month for housing plus all other debts.
Step 4: Check the existing debts.
Suppose the household pays $350 a month on a car loan and $150 on student loans — $500 a month in other debts. Housing ($2,333.33) plus other debts ($500) = $2,833.33, which is under the $3,000 back-end cap. The household passes both tests at the full 28% housing number.
Step 5: Split the housing budget into principal-and-interest and the rest.
The $2,333.33 covers everything — taxes, insurance, PMI, HOA — not just the loan. Assume $500 a month for property taxes and homeowners insurance. That leaves $2,333.33 − $500 = $1,833.33 a month for principal and interest.
Step 6: Convert the payment into a loan amount.
At 6.5% interest over 30 years, a $1,833.33 monthly payment supports a loan of $290,053.17. (The reverse of the payment formula: loan = payment × ((1 + r)^n − 1) ÷ (r(1 + r)^n).)
Step 7: Convert the loan into a home price.
With a 20% down payment, the loan is 80% of the price, so the home price is $290,053.17 ÷ 0.80 = $362,566.46.
So the 28/36 answer for a $100,000 salary with $500 in other debts is a home of about $362,566 — assuming 20% down ($72,513.29), a 6.5% rate, and $500 a month in taxes and insurance. Change any assumption and the answer moves. Run your own numbers with a free mortgage calculator — plug in the payment your budget allows and see the loan it supports.
How Much House Can You Afford at Your Salary?
The same method, at 6.5% over 30 years, with $500 a month allowed for taxes and insurance and a 20% down payment:
| Gross salary | Gross monthly | 28% housing cap | 36% total-debt cap | Max P&I payment | Max loan | Max home price |
|---|---|---|---|---|---|---|
| $60,000 | $5,000.00 | $1,400.00 | $1,800.00 | $900.00 | $142,389.74 | $177,987.17 |
| $80,000 | $6,666.67 | $1,866.67 | $2,400.00 | $1,366.67 | $216,221.45 | $270,276.82 |
| $100,000 | $8,333.33 | $2,333.33 | $3,000.00 | $1,833.33 | $290,053.17 | $362,566.46 |
| $120,000 | $10,000.00 | $2,800.00 | $3,600.00 | $2,300.00 | $363,884.88 | $454,856.11 |
These are maximums under the rule, not recommendations. A $60,000 salary caps out at a $177,987 home — in many markets that buys very little, which is why buyers in expensive areas save a bigger down payment, accept a higher DTI, or buy with a second income. The table also assumes no other debts; every dollar of car or student payment shrinks the housing budget.
How Does the Down Payment Change What You Can Afford?
The down payment changes the answer twice: it lowers the loan for the same home price, and it removes PMI. Take a $400,000 home at 6.5% over 30 years:
- 20% down ($80,000): loan $320,000, payment $2,022.62 a month, no PMI.
- 10% down ($40,000): loan $360,000, payment $2,275.44 a month, plus about $225 a month in PMI — $2,500.44 in total.
- 3% down ($12,000): loan $388,000, payment $2,452.42 a month, plus PMI of about $242.50 — roughly $2,694.92 in total.
The 20%-down buyer pays $477.82 a month less than the 3%-down buyer for the same house. But saving $80,000 takes years, and house prices rarely wait — that trade-off is personal, not mathematical. What the table does prove is that a smaller down payment is not free: the higher loan and the PMI together cost real money every month. Our guide to what is PMI works out exactly what that insurance costs and when it goes away.
What Do Lenders Actually Allow?
The 28/36 rule is conservative by design. In practice, many conventional lenders accept a back-end DTI up to about 43% to 45%, and some loan programs allow higher still when the borrower has strong credit, large cash reserves, or a low loan-to-value ratio. Fannie Mae’s automated underwriting, for example, can approve back-end ratios up to 50% in strong cases. That does not make the higher number wise — it makes it possible.
The gap between “the lender will approve it” and “you can comfortably afford it” is where buyers get into trouble. At a 45% back-end ratio, a $100,000 salary allows $3,750 a month in total debts — $750 more than the 36% cap, buying about $118,658 more house, but leaving $750 less every month for savings, emergencies, and life. Use the 28/36 rule as your planning number and treat the lender’s maximum as a ceiling you do not have to touch.
Three Ways to Afford More House
If the rule’s answer is lower than the homes you want, three levers move it — by more than most buyers expect.
1. Pay off other debts first. Every $500 a month of debt you eliminate frees $500 a month of housing budget under the back-end cap — and $500 a month supports $79,105.41 more loan at 6.5% over 30 years, or about $98,881.76 more home with 20% down. Clearing a $350 car payment and a $150 student payment is worth nearly $100,000 of house.
2. Get a lower rate. A rate of 6% instead of 6.5% turns a $2,528.27 payment on a $400,000 loan into $2,398.20 — saving $130.07 a month. The same $1,833.33 payment that supports a $290,053.17 loan at 6.5% supports about $305,784 at 6%. Improving your credit score before you apply, or buying the rate down with discount points, is real money. Our guide to how to calculate your monthly mortgage payment by hand shows the rate tables so you can see the effect yourself.
3. Save a bigger down payment. A bigger down payment cuts the loan for the same price, and crossing 20% removes PMI entirely. On the $400,000 home above, going from 10% down to 20% down saves $252.82 a month in principal and interest plus $225 in PMI — $477.82 in total. It also strengthens your offer in a competitive market.
Common Mistakes When Sizing Your Budget
- Budgeting on take-home pay with gross-pay rules. The 28/36 percentages use gross income. If you apply 28% to your after-tax pay, you will undershoot by hundreds of dollars — or worse, apply a lender’s gross-based approval to a take-home budget and overshoot.
- Forgetting taxes and insurance. The $2,528.27 payment on a $400,000 loan at 6.5% is principal and interest only. Add $500 in taxes and insurance and the real cost is $3,028.27 — which alone exceeds the 28% cap on a $100,000 salary. Always budget PITI, never P&I alone.
- Ignoring the back-end ratio. A $2,333.33 housing payment looks fine alone, but with $800 in car, student, and card payments the back-end total is $3,133.33 — over the $3,000 cap on a $100,000 salary, and a likely denial or a forced smaller loan.
A Faster Way to Check Your Number
Once you know your maximum monthly payment from the 28/36 rule, the rest is arithmetic — and a free monthly mortgage payment calculator does it in seconds. Enter your income, your debts, and your down payment, then test different rates and terms until the payment fits the rule.
FAQ: How Much House Can I Afford?
How much house can I afford on a $100,000 salary?
Under the 28/36 rule, about $362,566 with 20% down at 6.5% over 30 years, assuming $500 a month in taxes and insurance and $500 in other debts. The housing cap is $2,333.33 a month and the total-debt cap is $3,000.
What is the 28/36 rule?
Housing costs should stay under 28% of gross monthly income, and all debts combined — housing plus car, student, and card payments — should stay under 36%. It is a lender guideline for sizing a mortgage to income.
How much house can I afford on a $60,000 salary?
Under the same assumptions (6.5%, 30 years, $500 taxes and insurance, 20% down), about $177,987 — a $142,389.74 loan on a $900 monthly principal-and-interest payment.
Does the 28/36 rule use gross or net income?
Gross income — pay before taxes. Applying the percentages to take-home pay understates what the rule allows, while budgeting a gross-based approval against take-home pay overstates what you can live on.
Can I buy a house with a DTI above 36%?
Yes — many conventional lenders approve back-end ratios up to about 43% to 45%, and some programs allow up to 50% for strong borrowers. The 28/36 rule is a comfort guideline, not a legal limit.
How much does paying off debt increase my home budget?
A lot: every $500 a month of debt you clear frees $500 a month of housing budget, which supports $79,105.41 more loan at 6.5% over 30 years — about $98,881.76 more home with 20% down.