28/36 Rule Calculator
Max housing/debt from income.
The classic mortgage lending rule: 28% housing, 36% total debt.
How the Math Works
The 28/36 Rule is a widely used guideline in mortgage lending that helps determine how much of your gross monthly income should go toward housing costs and total debt payments. Specifically, the '28' portion means you should spend no more than 28% of your gross monthly income on housing expenses, including mortgage principal and interest, property taxes, insurance, and HOA fees. The '36' portion indicates that your total monthly debt payments—including housing costs plus car loans, student loans, credit cards, and other debts—should not exceed 36% of your gross monthly income. To calculate these amounts, simply multiply your gross monthly income by 0.28 for maximum housing costs and by 0.36 for total debt capacity, then subtract the housing cost to see how much is available for other debts.
Practical Applications
To apply the 28/36 Rule practically, start by calculating your gross monthly income (your income before taxes and deductions). Multiply this amount by 0.28 to find your maximum monthly housing budget, which includes your mortgage payment, property taxes, insurance, and any HOA fees. Next, multiply your gross monthly income by 0.36 to determine your total allowable debt payments, then subtract your projected housing costs to see how much you can afford to pay toward other debts each month. Lenders use these calculations during the mortgage application process to assess your ability to repay, but you can also use them as a personal budgeting tool before you apply for a loan to ensure you're targeting realistic housing prices within your financial means.
Day-to-Day Use
The 28/36 Rule is valuable in day-to-day financial planning because it provides a clear, quantifiable limit on housing and debt expenses before you even begin house hunting. By knowing your maximum housing budget early in your search, you can avoid falling in love with homes that are financially out of reach, saving you time and emotional energy. This rule also helps you maintain financial flexibility for emergencies, retirement savings, and other life goals, as it prevents you from overextending your finances with housing costs. Additionally, understanding these percentages can help you negotiate smarter mortgage terms and prepare a stronger loan application by demonstrating that you're within prudent debt-to-income guidelines that lenders prefer to see.
FAQ
Hard rule?
Some lenders go higher; FHA allows up to ~43%.