Short answer: lenders use the 28/36 rule — total monthly housing costs at or under 28% of gross monthly income, total monthly debts (housing plus everything else) at or under 36%. On a $120,000 salary with $750 a month in other debts, that’s about $2,800 a month for housing, which buys roughly a $351,000 home at current 2026 rates with 10% down. The math below shows exactly how each number is derived, so you can run it on your own income.
What the 28/36 rule actually is
The 28/36 rule is two debt-to-income ratios that most US mortgage lenders use when they size up your application — the CFPB lists DTI among the core underwriting factors for qualified mortgages.
28% — the front-end ratio. Your total monthly housing costs shouldn’t exceed 28% of your gross (pre-tax) monthly income. “Housing costs” means the full PITI bundle plus extras: principal and interest, property taxes, homeowners insurance, PMI (below 20% down), and HOA dues.
36% — the back-end ratio. All monthly debt payments combined — housing plus car loans, student loans, credit card minimums, personal loans, child support — shouldn’t exceed 36% of gross income.
Note what it uses: gross income, not take-home pay. For what you’ll be comfortable paying, re-run the math against net income — the result is more conservative, which is the point. For more on both ratios, see the Debt-to-Income Ratio guide.
The worked example: $120,000 income, $750 in debts
Say your household earns $120,000 a year — $10,000 a month gross — and carries $400 a month in car payments plus $350 a month in student loans ($750 total).
| Ratio | Math | Your ceiling |
|---|---|---|
| 28% front-end | 0.28 × $10,000 | $2,800/mo housing |
| 36% back-end | 0.36 × $10,000 − $750 debts | $2,850/mo housing |
The tighter of the two wins, so your binding budget is $2,800 a month. (For a different income band, see How Much House Can I Afford on $100K.) Now convert that monthly budget into a home price. As of early October 2026, 30-year fixed rates sit near 7–7.5% (Freddie Mac’s weekly survey showed 7.28% for the week ending October 1). Using 7.25%, 10% down, property taxes at 1.1% of the price per year, insurance at $2,000 a year, and PMI at 0.6% of the loan per year:
| Component | Monthly cost |
|---|---|
| Principal & interest ($315,737 loan) | $2,154 |
| Property taxes | $322 |
| Homeowners insurance | $167 |
| PMI (10% down) | $158 |
| Total | $2,800 |
So the ceiling is roughly a $351,000 home — needing about $35,000 down plus closing costs. All payment figures computed with the standard amortization formula; reproduce them with the Mortgage Calculator.
Notice what almost happened: with $750 a month in other debts, the 36% rule allowed $2,850 — barely above the 28% cap of $2,800, so the front-end rule bound. But if your debts were $1,200 a month instead, the back-end allowance drops to $2,400, and the same calculation supports only about a $298,000 home. A few hundred dollars of car and student-loan payments erases $50,000+ of buying power — paying down consumer debt before house-hunting is the highest-leverage move in this equation. Putting down less than 20%? The How Much Is PMI Per Month guide breaks down that $158 line item and how to drop it.
What counts in “housing costs”
Comparing only the mortgage payment to the 28% cap is the classic mistake. Lenders count the whole bundle: property taxes (roughly 0.3%–2.5% of value per year depending on the state), homeowners insurance (~$1,500–$2,500 a year, more in hurricane, wildfire, and flood zones), PMI (0.5%–1% of the loan per year below 20% down), HOA dues (sometimes $500+ a month in condo markets), and flood insurance where required.
Price these for your actual zip code before you get attached to a listing: two $350,000 homes can differ by $400+ a month in carrying costs purely on taxes and insurance.
The 28/36 rule isn’t a law — lenders stretch it
These ratios are guidelines, and lenders do approve borrowers outside them. Conventional loans routinely go to 45% back-end DTI for strong applicants, FHA loans commonly qualify at 43% back-end (higher with compensating factors like large cash reserves), and VA loans have no hard cap. Standards are published at HUD, and the Federal Reserve tracks the household debt conditions that shape lender strictness.
But approved is not comfortable. Every point past 36% comes out of your margin for the things lenders don’t count — maintenance (budget 1–2% of the home’s value per year), utilities, and the emergency fund that keeps a broken furnace from becoming credit-card debt. If the approved payment exceeds 25% of your take-home pay, you’re at the edge of your comfort zone even if the lender calls it qualified.
Before you shop: costs the rule ignores
Closing costs run 2%–5% of the purchase price ($7,000–$17,500 on a $350,000 home), due in cash on top of the down payment. A rate buydown can shrink the payment and stretch your ceiling — run the numbers with the Rate Buydown Calculator. Comparing a 15-year vs 30-year term? The shorter term builds equity faster but raises the payment, tightening your ceiling; compare both on the Loan Amortization Calculator.
Frequently asked questions
Is the 28/36 rule still accurate in 2026?
Yes, as a benchmark. The ratios haven’t changed — the rate environment has. With 30-year fixed rates near 7–7.5% in late 2026 versus under 3% in 2021, the same 28% budget now supports a noticeably smaller home. Always run the math at today’s rates.
What if my DTI is above 36% — can I still get a mortgage?
Often, yes. FHA loans commonly approve back-end DTIs up to 43%, conventional loans can reach 45%+ with strong credit and reserves, and VA loans have no formal cap. But approval isn’t comfort: treat the lender’s maximum as a ceiling, not a target.
Does the 28% rule include property taxes and insurance?
Yes. The 28% front-end ratio covers your entire monthly housing cost: principal, interest, property taxes, homeowners insurance, PMI, and HOA dues. Comparing only the mortgage payment to 28% understates your true cost by hundreds of dollars a month.
Should I use gross income or take-home pay?
Lenders use gross (pre-tax) income, so use gross when estimating what you’ll be approved for. For what you’re personally comfortable paying, re-run the ratios against take-home pay — 28% of net gives you breathing room the lender’s math doesn’t.