How Much House Can You Afford? Connecting Income, Debt, and Mortgage Payments
September 18, 2026
A common lending guideline, the 28/36 rule, suggests your monthly housing payment shouldn't exceed 28% of your gross monthly income, and your total debt payments (housing plus all other debt) shouldn't exceed 36%. These two ratios give a practical starting estimate for how much house you can actually afford.
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For a household with $8,000 gross monthly income: the housing payment limit is $8,000 × 0.28 = $2,240/month (the 'front-end' ratio). The total debt limit is $8,000 × 0.36 = $2,880/month (the 'back-end' ratio), which must cover the mortgage payment plus any car loans, student loans, and minimum credit card payments combined.
Why the Second Ratio Often Matters More
Many buyers focus only on the 28% housing limit, but the 36% total-debt limit is frequently the binding constraint — someone with significant student loan or car payments may qualify for a smaller mortgage than the housing-only ratio suggests, because their other debts are already eating into the 36% total-debt ceiling.
Turning the Payment Limit Into a Home Price
Once you know your maximum monthly housing payment, work backward using the mortgage amortization formula (accounting for your expected interest rate and loan term) to find the maximum loan amount that payment supports, then add your planned down payment to estimate a maximum home price. Remember this payment also needs to cover property taxes and insurance, not just principal and interest, which reduces the pure loan-payment portion available.
Frequently Asked Questions
What is the 28/36 rule?
A common lending guideline suggesting your housing payment shouldn't exceed 28% of gross monthly income, and total debt payments (including housing) shouldn't exceed 36% of gross monthly income.
Which ratio usually limits how much house I can afford, the 28% or the 36%?
It depends on your existing debt — buyers with significant other debt (car loans, student loans) often hit the 36% total-debt ceiling before reaching the 28% housing-only limit, which can reduce their affordable home price below what the housing ratio alone would suggest.
Does the 28% housing limit include property taxes and insurance?
Yes — lenders typically calculate the housing ratio using your full PITI payment (principal, interest, taxes, and insurance), not just the principal and interest portion.
How do I estimate the maximum home price I can afford?
Find your maximum monthly housing payment using the 28% rule, work backward through the mortgage payment formula to find the maximum loan amount that payment supports at your expected rate and term, then add your planned down payment.
Are the 28/36 ratios a hard requirement from lenders?
They're a common guideline, not a universal hard rule — actual lending limits vary by lender, loan type, credit profile, and down payment size, so pre-approval from an actual lender gives a more precise number than the 28/36 rule alone.