Home Loans
How Much Mortgage Can I Afford? The 28/36 Rule and What Lenders Check
How lenders convert your income and debts into a maximum loan, why their limit is not your budget, and a worked affordability example.
By Michael Bennett · Reviewed by Legamoney Mortgage & Lending Desk
Key takeaways
- The common guideline is 28% of gross monthly income on housing and 36% on total debt.
- Lenders underwrite on debt-to-income ratio, credit score, down payment, and documented income.
- The maximum a lender approves is a ceiling, not a recommendation.
- Rate moves change your buying power more than most people expect.
In this guide
The 28/36 rule
A worked example
Household gross income of $8,000 a month, with $250 in car payments and $150 in student loans.
- Front-end cap: 8,000 × 0.28 = $2,240 for all housing costs.
- Back-end cap: 8,000 × 0.36 = $2,880 total debt, minus $400 of existing debt = $2,480 available for housing.
- The binding constraint is the lower figure: $2,240.
- Reserve roughly $500 for taxes and insurance, leaving about $1,740 for principal and interest.
- At 6.5% over 30 years, $1,740 supports a loan of roughly $275,000.
- Add a 10% down payment and the purchase price lands near $305,000.
What lenders check beyond the ratios
Underwriting inputs and why they matter
| Factor | What it affects | Practical note |
|---|---|---|
| Credit score | Approval and pricing tier | Improvements before applying can lower the rate |
| Debt-to-income | Maximum loan size | Clearing a small loan can raise capacity |
| Down payment | LTV, mortgage insurance, rate | 20% typically removes PMI on conventional loans |
| Income stability | Whether income counts at all | Self-employed income usually needs two years of returns |
| Cash reserves | Approval strength | Some programmes require months of reserves |
How rates change what you can borrow
Loan supported by $1,740 per month of principal and interest, 30-year term
| Rate | Approximate loan amount |
|---|---|
| 5.5% | $306,000 |
| 6.0% | $290,000 |
| 6.5% | $275,000 |
| 7.0% | $262,000 |
The costs the ratios ignore
- Closing costs, commonly a few percent of the purchase price.
- Moving, immediate repairs, and furnishing.
- Ongoing maintenance — a frequently used planning figure is around 1% of home value a year.
- Utility and commuting differences versus your current home.
- Savings and retirement contributions the lender never asks about.
Sources
- 01Consumer Financial Protection Bureau — mortgage guidance and Ability-to-Repay rule
Federal consumer guidance on mortgages, disclosures, and lender underwriting obligations.
- 02Federal Housing Finance Agency — conforming loan limits
Annual baseline and high-cost-area limits for conforming conventional mortgages.
Frequently asked questions
How much mortgage can I afford on a $100,000 salary?
As a rough guide, the 28% rule allows about $2,333 a month in total housing costs on $8,333 of gross monthly income. After taxes and insurance, that supports a loan somewhere around $280,000–$300,000 at mid-6% rates, depending on your other debts.
Is the 28/36 rule still used?
It remains the common reference point, though many loan programmes approve higher back-end ratios when credit, reserves, or down payment are strong.
Should I borrow the maximum I am approved for?
Approval is a risk ceiling calculated from gross income. It ignores childcare, tuition, savings goals, and irregular expenses. Most buyers set a payment target below the approval and stick to it.
Editorial transparency
- Written by
- Michael Bennett — Mortgage writer — home financing, refinancing and interest rates
- Reviewed by
- Legamoney Mortgage & Lending Desk — Editorial desk — mortgages, home equity, and consumer credit
- How this was researched
- Ratio thresholds described here are the widely used underwriting conventions referenced in CFPB guidance; individual lenders and loan programmes set their own overlays.
- Corrections
- Spotted an error? Tell us and we will correct and re-date the page. See our editorial policy.
- Advertising disclosure
- Ad placements are clearly labelled and never influence editorial judgement or the ordering of comparisons.
About the author
Michael Bennett writes Legamoney's mortgage coverage: payment and amortisation maths, refinancing decisions, preapproval and underwriting, home equity and reverse mortgages. He works from HUD programme handbooks, CFPB rules under TILA and Regulation Z, and the FHFA conforming loan limits, and links to the weekly Freddie Mac survey rather than quoting a fixed rate. He works with the Legamoney Mortgage & Lending Desk.
How this article was checked
- Every factual claim is traced to a named regulator, government agency, or the provider's own published terms before publication.
- Figures that change — rates, limits, thresholds — link to the primary source that publishes them rather than being quoted as a fixed number.
- Worked examples are shown as full arithmetic so a reader can reproduce the result independently.
- Each guide is checked by the owning editorial desk before it is published, and again whenever the underlying rules change.
Covers: Mortgage payment and amortisation maths · Refinancing, break-even and closing costs · Preapproval, underwriting and affordability · Home equity, HELOCs and reverse mortgages
Reviewed by
Disclaimer
Affordability outcomes depend on lender policy, loan programme, and local taxes and insurance costs. Figures here are illustrations, not offers. Consult a qualified professional before acting on any information here. Read our full disclaimer.
