The 28% rule: The most common guideline
One of the most widely used affordability guidelines is known as the 28% rule. The idea is that your total monthly housing costs add up to no more than about 28% of your income before taxes. This includes your mortgage payment, property taxes and homeowners insurance. If your home has a homeowners association, those fees may also be part of the total.
28% isn’t a strict rule or a hard limit, though. It’s a helpful guideline that gives you a sense of what may feel manageable. Many buyers find that staying around this range makes it easier to cover everyday expenses, keep saving and handle unexpected home costs without feeling stretched.
The 36% rule: Looking beyond housing costs
The 28% rule looks only at your housing costs, but lenders also want to understand how your full monthly budget comes together. To do that, they look at something called your debt-to-income ratio, often shortened to DTI.
In simple terms, this means adding up all the regular debt payments you make each month, not just your mortgage. That can include things like car payments, student loans, credit card minimums and personal loans.
Lenders look at how your monthly debt payments compare to your income before taxes. 36% is a common benchmark, but some lenders consider slightly higher DTIs—up to around 43%—under certain circumstances.
Even if your housing payment feels manageable on its own, having a lot of other monthly debt can limit how much you’re approved to borrow. That’s why lenders look at the whole picture, not just your estimated mortgage payment.
How do lenders decide what you can afford?
When you apply for a mortgage, lenders look at your full financial picture rather than focusing on a single percentage. This helps them understand what you can reasonably manage month to month.
They’ll usually consider things like:
Income consistency | How steady your income has been over time and how predictable it looks going forward | |
|---|---|---|
Credit score and history | How you’ve handled borrowing and payments in the past shows how you manage financial commitments | |
Down payment amount | How much you’re able to put down upfront, which can affect both your loan structure and your monthly payment | |
Existing debt | Other regular payments you already have, such as car loans, student loans or credit cards | |
How your mortgage is structured, which can influence the monthly payment | ||
Costs that vary by location but play a meaningful role in your overall monthly housing expense |
Just because a lender says you can afford a certain amount, though, doesn’t mean it’s the right fit for you. Many buyers choose a smaller monthly payment so their budget still has room for savings, everyday expenses and life’s surprises.
How to calculate a mortgage payment that feels comfortable
If you’d like a simple way to estimate a monthly mortgage payment using common guidelines, you can walk through these steps:
- Start with your gross monthly income. Look at how much you earn each month before taxes. This gives you a starting point for the rest of the calculation.
- Estimate a housing payment using the 28% guideline. Take your monthly income and calculate about 28% of it. This gives you a rough idea of a housing payment that many buyers find manageable.
- Check how this fits with your other monthly debts. Add up payments for debts like car loans, student loans or credit cards, then look at how they compare to your income. Remember, lots of lenders prefer your total monthly debts to stay under about 43% of your income before taxes.
- Think about what feels comfortable for you based on your goals. Numbers are helpful, but they’re not the whole story. You might prefer a lower payment so you have room for savings, travel or future expenses or more breathing room each month.
Mortgage calculators can be a helpful way to test different scenarios. You can see how changes to the home price, down payment or loan type affect your monthly costs, which makes it easier to compare options and spot a payment range that feels workable.
As you explore those scenarios, it can also help to look at the range of home loan options available that support different financial situations, from conventional loans and VA loans to programs geared toward buyers who need more flexibility. Reviewing loan types alongside your budget can give you a clearer sense of how different choices may shape your monthly payment.
What the 28% guideline looks like in real life
Seeing percentages translated into dollars can make them easier to understand. These examples show how the 28% guideline might translate into a real-life monthly mortgage payment:
- If your monthly income is $5,000, 28% comes out to roughly $1,400 for a monthly housing payment.
- If your monthly income is $8,000, 28% works out to around $2,240 per month for housing costs.
These figures include common housing costs like your mortgage payment, property taxes and homeowners insurance. They’re meant to provide examples, not to set a spending target. Your own comfortable number may be higher or lower depending on your budget and priorities.
Turning guidelines into a comfortable budget
Many buyers start with familiar benchmarks like the 28% guideline for housing costs and a broader look at total monthly debt. These numbers offer a helpful framework, but they don’t replace your own sense of what feels manageable.
The most important step is choosing a monthly payment that fits your income, leaves room for other goals and feels sustainable over time. By understanding common guidelines, reviewing your full budget and exploring different loan options, you can move forward with more clarity as you plan for homeownership.
