How Much House Can I Afford? The 28/36 Rule

A simple rule lenders use to size a mortgage, with a worked example, plus the costs people forget when they set a budget.

Lenders do not decide your budget on a whim. Most start from two ratios, and you can use them too.

The 28/36 rule

Housing costs should stay under 28% of gross income, and all debt payments together under 36%. On an $80,000 income that is $22,400 a year, or about $1,867 a month, for housing, and $2,400 a month for all debts including the home.

Housing means more than the loan

Count principal and interest, property tax, home insurance and any association fees. Then keep money aside for repairs, often 1% of the home value each year.

Down payment and closing costs

A larger down payment lowers your monthly cost and may remove mortgage insurance. Plan for closing costs too, usually 2% to 5% of the price.

Check your own numbers

Use the house affordability calculator for a price range, the down payment calculator for savings goals, and the debt-to-income calculator to see where you stand. Then run the payment in the mortgage calculator.

This article is general education, not financial advice.