The 28/36 Rule Explained: A Simple Guide for Homebuyers

Introduction

Buying a home is exciting, but choosing a price you can comfortably afford is even more important. One of the best-known budgeting guidelines is the 28/36 rule. While it is not a legal requirement, it gives homebuyers a practical starting point when evaluating a mortgage.

What Is the 28/36 Rule?

The rule suggests spending no more than 28% of your gross monthly income on housing expenses and no more than 36% on all monthly debt payments combined. Housing costs generally include principal, interest, taxes, insurance and, when applicable, HOA fees and PMI.

Why It Matters

Following this guideline can help reduce financial stress and lower the risk of becoming ‘house poor.’ Lenders also review your debt-to-income ratio during the mortgage approval process.

Example

If your gross monthly income is $7,000, the housing guideline is about $1,960 per month (28%). Your total monthly debt should generally stay near or below $2,520 (36%). These figures are only examples and your own situation may differ.

When the Rule May Not Fit

Households with high savings, significant investments, variable income or expensive local housing markets may reasonably choose a different budget. The rule should support your decision, not replace careful financial planning.

Use an Affordability Calculator

Instead of estimating by hand, use our Affordability Calculator to compare different income, down payment and monthly expense scenarios before shopping for a home.

Helpful External Resource

In the paragraph discussing debt-to-income ratios, link the text ‘Consumer Financial Protection Bureau (CFPB)’ to: https://www.consumerfinance.gov/consumer-tools/mortgages/

Internal Links

• Affordability Calculator
• Mortgage Calculator
• Loan Calculator
• Refinance Calculator
• How Much House Can I Afford?

FAQ

Is the 28/36 rule required?

No. It is a commonly used guideline.

Does it include taxes and insurance?

Yes, housing costs should include those items.

Can I exceed the guideline?

Possibly, but it may increase financial risk and reduce financial flexibility.

Call to Action

Try our Affordability Calculator to estimate a realistic home-buying budget, then compare financing options with our Mortgage, Loan and Refinance Calculators.

Disclaimer

This article is for informational purposes only and does not constitute financial, legal or tax advice.