Home Affordability Made Simple: The 28/36 Rule Explained

As a homeowner, you understand that a house is more than just a place to live — it's a major financial commitment. Constantly-changing (and growing) costs make it easy to feel overwhelmed by financial demands.

In discussions about mortgage and debt, you might have heard about guidelines such as the "28/36 rule." While this sounds like a complex financial term, it's actually a straightforward way for lenders and financial planners to assess how much house you can comfortably afford. But beyond securing a mortgage, understanding this rule can offer you valuable insights into your own financial health, so you can budget more effectively and find greater peace of mind amidst the pressures of homeownership.

This guide breaks down the 28/36 rule into easy-to-understand terms, explaining exactly how it works and what it means for your financial planning. We'll explore why it's more relevant than ever for managing your home expenses and avoiding the stress that so many homeowners face today.

Why Financial Planning Matters More Than Ever

For many American homeowners, the dream of owning a home has, at times, become a financial squeeze in reality. Rising expenses have made it difficult to budget each month and find the disposable income that’s necessary to get ahead. If you're feeling this way, you're certainly not alone. A June 2025 Hometap survey painted a clear picture of the financial stress impacting homeowners across the U.S.

The survey revealed that a significant portion of homeowners feel financially stressed. In fact, nearly half of all respondents (44.5%) reported feeling "moderately," "very," or "extremely" stressed.

These rising costs aren't just speculative perception; they're a stark reality. The survey also found that a staggering 79.5% of homeowners believe the cost of homeownership is rising faster than their income. This intense pressure means that for many, housing costs are actively preventing them from achieving other financial goals, a sentiment confirmed by 54.4% of homeowners.

These statistics highlight a universal challenge: balancing the desire to maintain a comfortable home with the practicalities of a strained budget. It's clear that understanding tools like the 28/36 rule isn't just about qualifying for a mortgage anymore; it's about homeowners gaining control over their financial lives. It offers a clear framework to assess your debt-to-income ratio and understand how your monthly payments for housing and other monthly debt fit into your overall financial picture, ultimately helping you navigate the complexities of homeownership more confidently.

What Exactly is the 28/36 Rule?

The 28/36 rule is a straightforward guideline used by mortgage lenders and financial planners to determine if a potential borrower can comfortably afford their monthly mortgage payment and other monthly debt payments. Think of it as a financial health check that ensures you're not overextending yourself. It's designed to help you avoid future financial strain and keep your homeownership costs manageable.

Let's break down the 28/36 rule into its two simple parts:

The "28" Portion (Front-End Ratio): This part focuses on your housing costs. It states that your total monthly housing expenses should not exceed 28% of your gross monthly income. This refers to the money you earn before taxes and other deductions are taken out. Housing expenses typically include:

• Your mortgage payment (principal and interest)
• Property taxes (monthly portion)
• Homeowners insurance (monthly portion)
• Private mortgage insurance (PMI), if applicable (often required if your down payment is less than 20%)
• Homeowners association (HOA) fees, if applicable

This first number is often called the front-end ratio or mortgage-to-income ratio because it specifically refers to the costs directly tied to your home.

The "36" Portion (Back-End Ratio): This second part considers all your monthly debts, including your housing costs. It states that your total monthly debt payments — which include your housing costs from the "28"portion, plus all other debts — should not exceed 36% of your gross monthly income. These other debts typically include:

• Car loans
• Student loans
• Minimum credit card payments
• Other personal loans or installment debts

This broader calculation is known as the back-end ratio or the debt-to-income ratio (DTI). It gives lenders a comprehensive view of your overall financial obligations as they relate to your income.

In essence, the 28-36 rule provides a prudent benchmark to help ensure that your housing costs and total debt-to-loan ratio for mortgage purposes don't consume too much of your income, leaving you with enough money for other living expenses, savings, and discretionary spending. Following this guideline can be a powerful strategy for maintaining financial stability and preventing the kind of budget strain that many homeowners experience.

How the 28/36 Rule Works in Practice

Understanding the 28/36 rule in theory is one thing, but knowing how to calculate it for your own situation is key to making informed financial decisions. Let's walk through how to apply this rule to your personal finances. Remember, these calculations are based on your gross monthly income: the amount you earn before any deductions.

Calculating Your Front-End Ratio (The "28" Part)

The first step is to figure out your total monthly housing expenses. These are the costs directly associated with owning and living in your home.

1. Determine your gross monthly income: If you earn an annual salary, divide it by 12. For example, if you earn $80,000 per year, your gross monthly income is $80,000 / 12 = $6,666.67.

2. Calculate 28% of your gross monthly income: This is the maximum recommended housing cost amount. Using our example: $6,666.67 * 0.28 = $1,866.67. This means your total monthly housing expenses should ideally not exceed $1,866.67. This directly answers the question, "What is the maximum mortgage payment using the standard 28/36 guidelines?" It's not just the mortgage payment, but all housing-related expenses.

3. Add up your monthly housing costs:

• Principal & interest (P&I): This is your actual mortgage payment. Use a mortgage calculator to estimate this before you begin shopping for a home.
• Property taxes: Divide your annual property taxes by 12.
• Homeowners insurance: Divide your annual homeowners insurance premium by 12.
• Private mortgage insurance (PMI): If your down payment is less than 20% of the home's value, you'll likely pay PMI. This cost is usually a percentage of your loan amount and paid monthly.
• HOA fees: If your home is part of a Homeowners association, include your monthly fees.
• Example: Let's say your estimated monthly mortgage P&I is $1,200, property taxes are $300, homeowners insurance is $100, PMI is $50, and HOA fees are $0. Your total monthly housing costs would be $1,200 + $300 + $100 + $50 = $1,650.

In this example, your $1,650 in housing costs is less than the $1,866.67 maximum (28% of $6,666.67 gross monthly income), so you're on track with the "28" part of the rule.

Calculating Your Back-End Ratio (The "36" Part)

Now, let's look at your total debt-to-income ratio (DTI), which includes all your monthly debt payments.

For consistency, we’ll use $6,666.67 from our previous example as your gross monthly income.

1. Calculate 36% of Your Gross Monthly Income: This is the absolute maximum recommended for all your debts combined. Using our example: $6,666.67 * 0.36 = $2,400. This means your total monthly debt payments, including your housing costs, should ideally not exceed $2,400.

2. Add Up All Your Monthly Debt Payments:

• Your total monthly housing costs: (from the previous step) $1,650 per our example.
• Car loans: Your monthly payment.
• Student loans: Your monthly payment.
• Credit card payments: Only include the minimum payment due, not your full balance.
• Other installment debts: Any other regular monthly loan payments.
• Example: Starting from $1,650, let's add the other debts: a car loan ($350 monthly), student loans ($150 monthly), and credit card minimum monthly payments ($50). Your total monthly debt payments would be $1,650 (housing) + $350 (car) + $150 (student) + $50 (credit cards) = $2,200.

In this case, your total debt payments of $2,200 are less than the $2,400 maximum (36% of your $6,666.67 gross monthly income). So, you meet both recommendations for the 28/36 rule.

By breaking down your income and expenses this way, you can clearly see how much house you can afford and what adjustments might be needed to meet the guidelines. This practical application of the 28/36 rule provides a tangible roadmap for home-buying and financial stability, helping answer questions like "How much salary do I need to afford a $500,000 mortgage?" by providing a personal framework.

Why Lenders Care So Much: The 28/36 Rule and Your Mortgage Application

Why do mortgage lenders care so much about these particular ratios? The simple answer: risk assessment. When you apply for a mortgage, lenders need to be confident that you can consistently make your monthly payments without undue financial strain. The 28/36 rule provides a standardized way to measure your financial capacity and predict your loan repayment ability.

Here's why lenders care so much:

• Predicting affordability: The primary goal for lenders is to ensure you can truly afford your home. If your mortgage payment and other housing costs are too high relative to your gross monthly income, the risk of default increases. The 28% rule helps them gauge your ability to manage those direct home-related expenses.
• Assessing overall debt burden: The 36% rule gives lenders a comprehensive picture of your entire monthly debt load. This debt-to-income ratio (DTI) is important because it accounts for all other financial obligations, such as car loans, student loans, and credit card debt, that compete with your mortgage payment for your monthly income. A high DTI tells them that a large portion of your income is already committed, leaving less flexibility for unforeseen expenses or emergencies.
• Determining creditworthiness and credit score: While your credit score reflects your past payment history and reliability, your DTI (especially the back-end 36% ratio) shows your current capacity. Both are critical components that lenders evaluate. A strong credit score combined with a low DTI signals a responsible and capable borrower.
• Minimizing risk for all parties: By adhering to these guidelines, lenders protect their investments, and borrowers protect themselves from taking on more debt than they can comfortably handle. It's a win-win: lenders reduce their exposure to bad loans, and homebuyers reduce their risk of financial stress and potential foreclosure.

It's important to remember that while the 28/36 rule is a widely-accepted benchmark, it's merely a guideline — not a law. Some lenders might be more flexible depending on other factors, such as a strong credit score, a substantial down payment, or significant savings. Government-backed loans (like FHA loans) may also have slightly different DTI limits. However, for most conventional mortgage lenders, meeting or staying below these ratios is a strong indicator that you’re a low-risk borrower and helps you secure the most favorable interest rates and loan terms. Financial planners also use this rule as a foundational benchmark for their clients, helping them gauge overall financial health and set realistic goals for debt reduction and savings.

Beyond the Rule: Navigating Real-World Homeownership Costs

While the 28/36 rule is an excellent starting point for understanding mortgage affordability, homeowners should understand that the true cost of homeownership extends far beyond just the monthly mortgage payment. Many homeowners, especially those who have owned their homes for years, can attest to unexpected or hidden costs that can add up quickly and put a significant strain on their budgets.

Consider the other essential expenses that come with owning a home:

• Utilities: These are ongoing costs for electricity, water, gas, internet, and trash removal. According to our survey, utility bills were the cost that caused the most stress for 23.1% of homeowners. For Millennials (25-44), 30% reported utility bills as having increased the most in the past 12 months, making this a tangible and growing concern for families.
• Maintenance and repairs: From a leaky faucet to a deteriorating roof, regular home maintenance and unexpected repairs are inevitable. Our survey also revealed that maintenance/repairs caused the most stress for 23.8% of homeowners. Disturbingly, 38.7% of homeowners admitted to delaying necessary home repairs/maintenance to make homeownership more affordable, and 48.4% have delayed home improvements and/or renovations. This highlights a significant pain point: homeowners are struggling to keep up with the physical demands of their homes due to financial constraints.
• Property taxes and homeowners insurance: While these costs are included in the 28% calculation, they can fluctuate significantly. Property taxes were cited as the single biggest cost increase for 22.8% of homeowners in the past 12 months, and the most stressful for 17.5% based on our June survey results. Homeowners insurance premiums are also a rising concern, with 16.8% reporting it as the biggest increase and 12.2% as the most stressful.
• Other costs: These can include pest control, landscaping, security systems, and even unexpected appliance breakdowns.

The data underscores a key challenge: nearly half of homeowners (45.5%) consider "keeping up with growing homeownership costs" to be their most stressful financial concern over the next year.

This is precisely why gaining a holistic view of all your homeownership expenses is so vital. It’s one thing to afford your initial mortgage payment, but it’s a completely different challenge to maintain long-term affordability when faced with these additional — and often fluctuating — costs. Many feel their financial assets are tied up in their homes, and they need money but aren’t yet ready to sell. Understanding these "beyond-the-mortgage" costs is the first step toward smart financial planning and a less stressful, more sustainable homeownership experience.

We created our True Cost of Homeownership Assessment to make it even easier to calculate these expenses.

What Happens if You Exceed the 28/36 Rule? (And What to Do About It)

Understanding the 28/36 rule is valuable, but it’s equally important to know what it means if your current or prospective financial situation falls outside of this guideline. For mortgage lenders, borrows who either exceed the 28% (front-end) or 36% (back-end) ratio are typically considered higher risk. This can have several direct consequences:

Difficulty securing a mortgage: If your debt-to-income ratio (DTI) is too high, mortgage lenders may deny your loan application, since a high DTI is an indicator that you might struggle to make consistent monthly payments, and run an increased risk of a default.

Higher interest rates: Even if a lender is willing to approve your loan with a higher DTI, they’ll often offset the increased risk by increasing your interest rate. This leads to a larger mortgage payment over the life of the loan and ultimately costs you significantly more in the long run.

Less favorable terms: You might be approved for a smaller loan amount than you initially desired, or you may face other less attractive loan terms, such as a larger down payment requirement.

Financial strain: Beyond the loan application, exceeding the 28/36 rule means that debt consumes a larger portion of your gross monthly income. This leaves less money for necessities, savings, and emergencies, contributing to the financial stress reported by nearly half of homeowners. It also makes it harder to save for retirement, pay off existing debt, or pursue other financial goals, a sentiment echoed by over half of Hometap survey respondents who feel their housing costs are preventing them from achieving financial milestones. This can lead to a constant feeling of being stretched thin, a key pain point for many homeowners today.

Strategies to Improve Your Ratios:

If your current ratios are higher than the 28/36 guidelines, don't despair. There are actionable steps you can take to potentially improve your financial standing:

• Reduce monthly debt payments: This is often the most direct way to lower your back-end DTI. Focus on paying down high-interest credit card balances first, followed by car loans or student loans. Even reducing your minimum payments by paying off a single credit card can make a difference. Our cost of debt calculator can help you determine which debts to prioritize.
• Increase gross monthly income: You can boost your pre-tax earnings and lower your ratios by exploring options for a raise, promotion, side hustle, or second job.
• Consider a smaller housing expense: If you're currently looking to buy, aim for a less expensive home. This directly reduces your mortgage payment and other related housing costs. If you already own, see if refinancing/loan modifications could lower your interest rate and monthly mortgage payment — just be cautious about extending your loan term.
• Improve your credit score: A higher credit score (often 740+ for the best rates) can help you qualify for lower interest rates, which in turn reduces your monthly mortgage payment and improves your front-end ratio.
• Increase your down payment: A larger down payment means you borrow less, which results in a smaller mortgage payment. It can also help you avoid Private Mortgage Insurance (PMI), further reducing your monthly housing expenses.

By proactively addressing these areas, you can take control of your financial ratios, increase your chances of securing favorable mortgage terms, and reduce the stress associated with homeownership.

Taking Control: Making Homeownership Affordable and Stress-Free

It can feel daunting to navigate the financial landscape of homeownership, especially with rising costs and an abundance of confusing financial products. However, when armed with the right knowledge and tools, you can turn stress and overwhelm into confidence and control. The 28/36 rule serves as a baseline benchmark, offering a clear lens through which to view your mortgage to income ratio and overall debt to loan ratio for mortgage approval and personal financial health. It’s a vital first step in understanding how much you can truly afford without stretching your budget to its breaking point.

Beyond these initial guidelines, it’s critical to recognize and plan for the full scope of housing costs — from property taxes and homeowners insurance to utilities and essential maintenance — to ensure long-term stability.