Home budget and affordability
The 28/36 rule: a quick budget test and where it falls short
The 28/36 rule fits on a sticky note, which is why it is everywhere. It is a reasonable first screen for a home budget, but it is not a lending rule, and treating it as one can push you too high or hold you back for no reason.
Reviewed November 2026 · Written for Buy Home Tips from the sources listed below
The 28/36 rule says your housing payment should be no more than 28 percent of your gross monthly income, and all of your monthly debt payments together, including housing, should be no more than 36 percent. It is a rule of thumb used in personal finance. You will not find it in federal regulations or in the program guides that lenders follow, which set their own limits.
Applying it
Take your gross monthly income and multiply it by 0.28 to get the housing ceiling and by 0.36 to get the total debt ceiling. The difference between the two is the room the rule leaves for car loans, student loans and card minimums. If your existing debts are larger than that room, the rule says your housing payment should shrink by the difference.
On $6,000 a month, the rule allows $1,680 for housing and $2,160 for all debts, leaving $480 for other payments. A buyer with a $650 car and student loan bill has $170 too much. Under the rule, that buyer's housing payment would drop to $1,510.
How the rule compares with lender limits
Programs publish their own ratios, and they are usually higher than 28/36.
- FHA. HUD's manual underwriting baseline is 31 percent for housing and 43 percent total, with higher limits allowed when the file has documented compensating factors.
- Fannie Mae. For manually underwritten loans, the maximum total ratio is 36 percent, or up to 45 percent with stronger credit and reserves. Loans run through Desktop Underwriter can go up to 50 percent.
So the 28/36 rule is more conservative than most approvals. That is the point of it: it leaves room for costs that lenders never see.
Where the rule falls short
The rule ignores everything outside debt. Childcare, commuting, health costs and family support can take more of a budget than a car loan. It also ignores where you live. Property taxes, insurance premiums and association dues vary widely, so the same 28 percent buys very different homes in different counties.
The rule also says nothing about savings. A buyer who empties every account for the down payment and closing costs is at risk even with a modest payment. Repairs arrive on their own schedule.
A better way to use it
Treat 28/36 as a first filter, then check it three ways:
- Against your take-home pay. Divide the full housing payment by your net monthly pay. If the result is uncomfortable, the rule's figure is too high for you.
- Against your real spending. List your fixed costs that lenders do not count, and see what is left after housing.
- Against a trial run. For a few months, set aside the difference between your rent and the proposed payment. If that is hard, lower the target.
When the rule and a lender's approval disagree, the rule is usually the safer starting point. When the rule and your real budget disagree, trust the budget.
Mini calculator: your debt-to-income ratios
Lenders divide monthly debt payments by gross monthly income. See your housing-only ratio and your total ratio with a proposed payment.
Limits differ by loan type and lender. A ratio a lender accepts can still be uncomfortable for your household.
Adjust the rule to your life
- Start from gross monthly income, then write down take-home pay next to it.
- Use a full housing payment: principal, interest, tax, insurance, mortgage insurance and dues.
- Subtract childcare, commuting and other large fixed costs that lenders do not count.
- Set aside a monthly amount for repairs before deciding the payment is affordable.
- Compare the result with what lenders say they would approve, and pick the lower of the two.
Questions buyers ask
Is the 28/36 rule required by lenders?
No. It is a rule of thumb. Lenders follow the limits of the loan program and their own policies. Fannie Mae's Selling Guide, for example, sets a 36 percent total limit for manually underwritten loans but allows up to 50 percent through its automated system.
Does the 28 percent include taxes and insurance?
It should. The rule is most useful when the housing figure includes principal, interest, property tax, homeowners insurance, mortgage insurance and association dues, which is what lenders count in a housing payment.
Is 28 percent of gross or net income?
The usual version uses gross income, the same base lenders use. Because take-home pay is smaller, the same payment is a larger share of what actually reaches your account.
What if I have no other debt?
Then the 36 percent limit leaves extra room, but the 28 percent housing figure still applies under the rule. Many households in that position use the spare room for savings rather than a larger payment.
Sources checked for this page
- CFPB: what is a debt-to-income ratio
- Fannie Mae Selling Guide B3-6-02: debt-to-income ratios
- HUD Mortgagee Letter 2026-11: minimum decision credit score and ratio tables
Checked November 2026. Programs and limits change; confirm with the source before you rely on a figure.