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.
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
- Legamoney Editorial Team — Editorial Team — finance, insurance, lending and consumer legal topics
- Reviewed by
- Not independently reviewed.
- 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
Legamoney is an independent publisher of explanatory guides on borrowing, insurance, personal finance and everyday consumer legal questions. Articles are written by the editorial team rather than by a single named contributor, and they are built from published rules and data from regulators and government agencies — not from opinion or industry marketing. Every guide lists the sources it was written from, shows its arithmetic in full where numbers are involved, and carries publication and update dates so you can judge how current it is. We do not sell financial products, take commission on referrals, or let commercial relationships influence coverage.
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.
- All worked examples are arithmetic shown in full, so a reader can reproduce the result independently.
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- Corrections are made on the live page and the update date is changed; readers can report an error at any time via the contact page.
Primary sources we work from include Consumer Financial Protection Bureau, U.S. Department of Housing and Urban Development, Federal Housing Finance Agency, Freddie Mac Primary Mortgage Market Survey, Federal Reserve — Consumer Credit (G.19), National Association of Insurance Commissioners, Internal Revenue Service and Social Security Administration.
Covers: Consumer lending and mortgages · Insurance policy terms and coverage · Personal finance arithmetic and calculators · Primary-source verification and editorial standards
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.
