One of the most common questions first-time homebuyers ask is: "How much house can I actually afford?" It's a deceptively simple question with a surprisingly complex answer — one that depends on your income, debts, down payment, interest rate, and local taxes. Lenders, financial advisors, and housing experts have used the 28/36 rule for decades as a practical starting framework. It's not perfect, but it's a reliable first filter for knowing whether a particular home is in your price range.
What Is the 28/36 Rule?
The 28/36 rule is a two-part affordability guideline used by most conventional lenders when evaluating mortgage applications:
• The 28% side: Your total monthly housing costs (principal, interest, property taxes, and homeowners insurance — collectively known as PITI) should not exceed 28% of your gross monthly income.
• The 36% side: Your total monthly debt obligations — including your housing payment plus car loans, student loans, credit card minimums, and other recurring debts — should not exceed 36% of your gross monthly income.
The lower of the two limits is the one that applies to your situation. If your debt load is high, the 36% cap on total debt will be the binding constraint. If you're debt-free, the 28% housing limit will be your ceiling.
How to Calculate Your Number
Let's walk through a concrete example. Suppose you earn $90,000 per year (gross), which is $7,500 per month. You have a $400/month car payment and $200/month in student loan minimums.
Step 1 — Apply the 28% housing rule: $7,500 × 0.28 = $2,100/month maximum PITI
Step 2 — Apply the 36% total debt rule: $7,500 × 0.36 = $2,700 total debt allowed Minus existing debts: $400 + $200 = $600 Maximum housing: $2,700 − $600 = $2,100/month
In this case, both rules give the same result: $2,100/month. This is your maximum PITI payment — but note that it includes taxes and insurance, which typically add $300–$700/month depending on your location. If we subtract $500 for taxes and insurance, your maximum principal and interest payment is $1,600/month.
At a 7% interest rate on a 30-year mortgage, a $1,600/month payment supports a loan of approximately $240,000. Add your down payment (say, $48,000 for 20%), and your maximum home price is around $288,000.
When the 28/36 Rule Is Too Generous
The 28/36 rule was designed in an era of lower home prices and interest rates. With today's combination of high prices and 6–8% mortgage rates, many financial advisors suggest being more conservative — targeting 22–25% of gross income for housing costs rather than 28%.
Here's why the conventional limits may not be right for you:
Emergency reserves: A housing payment at 28% of income leaves little room for building an emergency fund, retirement savings, or handling unexpected costs. Financial planners typically recommend saving 15–20% of income — if 28% goes to housing, something has to give.
Variable income: If any portion of your income is variable (bonuses, freelance, commissions), base your calculation on your guaranteed base salary only. Using expected income that doesn't materialize is a primary driver of mortgage distress.
Maintenance costs: New homeowners frequently underestimate ongoing costs. Budget 1–2% of the home's value annually for maintenance and repairs. On a $400,000 home, that's $4,000–$8,000 per year — another $333–$667/month not captured in the PITI calculation.
When the 28/36 Rule Is Too Conservative
In high-cost metro areas — San Francisco, New York, Seattle, Boston — very few buyers can meet the 28/36 guideline at the local median home price. In these markets:
FHA loans allow a front-end ratio up to 31% and back-end ratio up to 43%, and may approve even higher with compensating factors (excellent credit, large reserves).
Fannie Mae and Freddie Mac allow DTI ratios up to 45–50% for conventional loans when compensated by strong credit (740+) and substantial reserves.
If you're in a high-cost market with strong job security, significant assets, and an excellent credit score, stretching modestly beyond the 28/36 guideline may be a rational decision. The key is ensuring you still have breathing room — six months of mortgage payments in liquid savings, at minimum.
Real Examples at Different Income Levels
To make this concrete, here are maximum home prices under the 28/36 rule at various income levels, assuming: 20% down payment, 7% interest rate, 30-year term, $400/month in existing debt, and $500/month for taxes + insurance.
Income $60,000/year → Max home price: ~$195,000 Income $80,000/year → Max home price: ~$265,000 Income $100,000/year → Max home price: ~$335,000 Income $150,000/year → Max home price: ~$515,000 Income $200,000/year → Max home price: ~$690,000
These figures shift significantly with different interest rates, debt loads, and local property tax rates. The PropTechVault Affordability Calculator does these calculations automatically based on your specific inputs.
Use our free Home Affordability Calculator to get your personalized maximum home price based on your actual income, debt, and current interest rates.
The Bottom Line
The 28/36 rule is a useful starting point, not a ceiling or a floor. The goal is to buy a home you can comfortably afford — one that allows you to save for retirement, handle emergencies, and enjoy life without constant financial stress. Use the rule as a filter, then do a deeper budget analysis to confirm the numbers work for your specific situation. A home at 80–90% of your maximum is often the right choice.