What the 28/36 rule says
The 28/36 rule, referenced by the Consumer Financial Protection Bureau (CFPB) and used as a conventional benchmark by mortgage lenders, sets two separate income-based caps on borrowing: housing costs should generally not exceed 28% of a borrower's gross monthly income, and total monthly debt obligations -- housing costs plus all other recurring debts -- should generally not exceed 36% of gross monthly income. A household's actual maximum affordable payment is whichever of the two caps is lower, since both conditions must be satisfied at once.
The rule is a screening benchmark rather than an approval guarantee. Actual mortgage underwriting also considers credit score, employment history, cash reserves, and the specific loan program, and government-backed or specialized loan programs sometimes permit higher debt-to-income ratios than the traditional 28/36 guideline suggests.
The front-end ratio: housing costs alone
The front-end ratio measures housing costs -- commonly abbreviated PITI for principal, interest, property taxes and insurance -- as a share of gross monthly income, and the 28% cap applies to this figure alone, independent of any other debts a borrower carries. A calculator or lender that reports only principal and interest, without taxes and insurance, will understate true housing cost relative to this 28% benchmark, so borrowers should add estimated property tax and insurance before comparing a payment against the cap.
Because the front-end ratio ignores non-housing debt entirely, it can overstate what a household can actually afford to borrow whenever significant other debts -- student loans, car payments, credit card minimums -- are also present, which is exactly the scenario the second, back-end ratio is designed to catch.
The back-end ratio: all debt combined
The back-end ratio measures total monthly debt payments -- housing costs plus car loans, student loans, personal loans and minimum credit card payments -- as a share of gross monthly income, capped conventionally at 36%. Because every dollar of existing debt payment counts against this 36% ceiling, a household carrying substantial non-housing debt will often find the back-end ratio, not the front-end ratio, is the binding constraint on how large a mortgage payment it can support.
US qualified-mortgage underwriting standards have historically referenced a back-end debt-to-income ceiling as high as 43%, and some loan programs permit ratios above that with compensating factors such as a strong credit score or significant cash reserves. The 28/36 benchmark is therefore a conservative reference point rather than the maximum every lender will approve.
Worked example: a $90,000 income with existing debt
Consider a household with $90,000 in gross annual income, $500 in existing monthly debt payments, a $40,000 down payment available, and an expected 6% mortgage rate over a 30-year term. Gross monthly income is $90,000 / 12 = $7,500. The front-end cap is 28% x $7,500 = $2,100. The back-end cap is 36% x $7,500 = $2,700, minus the $500 of existing debt, leaving $2,200 available for housing. Because $2,100 is lower than $2,200, the front-end ratio is the binding constraint, and the maximum affordable housing payment is $2,100 per month.
Converting that $2,100 payment into a loan amount uses the amortization formula in reverse: with a monthly rate r = 0.06/12 = 0.005 and n = 360 monthly payments, the annuity factor [(1+r)^n - 1] / [r(1+r)^n] equals approximately 166.79, so the maximum loan is $2,100 x 166.79 = $350,262. Adding the $40,000 down payment gives an estimated maximum home price of $350,262 + $40,000 = $390,262.
| Input | Value | Result |
|---|---|---|
| Gross monthly income | $7,500 | — |
| Front-end cap (28%) | — | $2,100 |
| Back-end cap (36% minus $500 debt) | — | $2,200 |
| Binding maximum payment | — | $2,100 (front-end) |
| Maximum loan at 6%, 30 years | — | $350,262 |
| Maximum price with $40,000 down payment | — | $390,262 |
How down payment and interest rate change the answer
The down payment adds directly, dollar for dollar, to the maximum affordable price, because it does not change the maximum monthly payment or the loan amount that payment supports -- it simply covers a larger share of the purchase price in cash. Using the same $2,100 maximum payment from the worked example, a $20,000 down payment produces a maximum price of $370,262, a $40,000 down payment produces $390,262, and a $60,000 down payment produces $410,262 -- each $20,000 increase in down payment raises the maximum price by exactly $20,000.
The interest rate, by contrast, changes the loan amount that a fixed maximum payment can support, because it changes the annuity factor used to convert payment into principal. Holding the $2,100 maximum payment and the 30-year term constant, raising the rate from 6% to 7% lowers the annuity factor from about 166.79 to about 150.31, cutting the maximum loan from $350,262 to approximately $315,646 -- a reduction of roughly $34,616 in borrowing power for a one-percentage-point rate increase, even though the maximum monthly payment itself has not changed.
Limitations of the 28/36 rule
The 28/36 rule, as applied in a simple calculation, typically covers principal and interest only; property taxes, homeowner's insurance, private mortgage insurance (PMI) and HOA dues -- all of which lenders include in the front-end ratio during actual underwriting -- would reduce the affordable loan amount further once they are added to the payment. The rule also assumes a fixed rate and stable income for the full comparison; it does not model rate changes, income volatility, or a household's other financial goals beyond meeting the stated debt-to-income caps.
Because the 28/36 rule is a conservative screening benchmark rather than a guaranteed approval threshold, the maximum figure it produces should be treated as a starting reference point for further budgeting -- including a buffer for maintenance, closing costs of roughly 2% to 5% of the loan amount, and savings goals unrelated to housing -- rather than a target to borrow up to.
Sıkça Sorulan Sorular
What is the 28/36 rule for mortgage affordability?
The 28/36 rule is a conventional lending guideline stating that monthly housing costs should not exceed 28% of gross monthly income (the front-end ratio) and total monthly debt payments should not exceed 36% of gross monthly income (the back-end ratio). The Consumer Financial Protection Bureau cites it as a common affordability benchmark, and the lower of the two caps determines the maximum affordable payment in a given scenario.
How much house can I afford on a $90,000 income?
With $90,000 in gross annual income ($7,500 per month), $500 of existing monthly debt, and a 6% rate over 30 years, the 28% front-end cap of $2,100 is lower than the 36% back-end cap of $2,200 (after subtracting the $500 debt), making $2,100 the binding maximum payment. That payment supports a loan of approximately $350,262, or a maximum home price of about $390,262 with a $40,000 down payment.
What is the difference between the front-end and back-end ratio?
The front-end ratio measures only housing costs -- principal, interest, property taxes and insurance -- as a share of gross monthly income, capped conventionally at 28%. The back-end ratio measures all monthly debt payments, including housing costs plus car loans, student loans and credit card minimums, capped conventionally at 36%. Whichever cap produces the lower maximum payment is the binding constraint for a given borrower.
Does a bigger down payment let me afford a more expensive house?
Yes, and by exactly the amount added. A down payment increases the total purchase price a fixed maximum loan can cover without changing the loan amount itself or the monthly payment, so each additional dollar of down payment raises the maximum affordable price by one dollar. In a worked example, raising the down payment from $20,000 to $40,000 raised the maximum price from $370,262 to $390,262 -- precisely the $20,000 difference.
How much does a higher interest rate reduce how much house I can afford?
A higher rate reduces the loan amount a fixed maximum monthly payment can support, because it lowers the annuity factor used to convert payment into principal. In a worked example holding the maximum payment at $2,100 over 30 years, raising the rate from 6% to 7% cut the maximum loan from about $350,262 to about $315,646 -- a reduction of roughly $34,616 from a one-percentage-point rate increase alone.
Is the 28/36 rule the same as what a lender will actually approve?
No. The 28/36 rule is a conservative screening benchmark, not a guaranteed approval threshold. Actual mortgage underwriting also weighs credit score, employment history and cash reserves, and US qualified-mortgage standards have historically referenced back-end debt-to-income ratios as high as 43%, with some programs permitting more given compensating factors. The 28/36 figures are useful as a conservative starting estimate rather than a lender's final decision.
Kaynaklar
- Consumer Financial Protection Bureau (CFPB). Debt-to-income ratio and mortgage affordability guidance. consumerfinance.gov.
- Consumer Financial Protection Bureau (CFPB). Ability-to-Repay and Qualified Mortgage rule (Regulation Z). consumerfinance.gov.
- US Department of Housing and Urban Development (HUD). Buying a home: what you need to know. hud.gov.
- Fannie Mae. Selling Guide — debt-to-income ratio requirements. fanniemae.com.
- Freddie Mac. Understanding mortgage options and loan types. freddiemac.com.
- Brealey RA, Myers SC, Allen F. Principles of Corporate Finance (13th ed.). McGraw-Hill, 2020. Chapter 2: How to Calculate Present Values.