How Much House Can I Afford? The 28/36 Rule in 2026

How much house you can afford starts with a monthly budget, then a purchase-price calculation. A lender's approval is one constraint; your take-home pay, living costs, savings and cash remaining after closing are others. The familiar 28/36 rule is a planning heuristic, not a promise of approval or a safe spending limit for every household.

Use both ratios, then check take-home cash

The CFPB defines debt-to-income ratio as monthly debt payments divided by gross monthly income. In the 28/36 heuristic, housing uses at most 28% of gross income, while housing plus other counted debt uses at most 36%. For this planning model, the housing allowance is the smaller of those two amounts after subtracting other debt from the second.

At $120,000 annual gross income, the monthly income is $10,000. With $630 of other debt payments, the two housing allowances are $2,800 and $2,970, so the heuristic uses $2,800. With $1,200 of other debt, the second allowance falls to $2,400 and becomes binding. Paying off debt is not automatically preferable if it consumes cash needed for closing or emergencies.

Daycare, food, utilities, retirement saving and medical costs still matter even when they are not counted as loan debt. Reconcile the proposed payment against actual take-home pay and these expenses. For example, with $7,000 take-home pay, $630 debt payments, $2,500 other spending and $800 planned saving, $3,070 remains before housing. A $2,800 payment leaves only $270 for omitted expenses or overruns; it does not establish that the purchase is comfortable.

A purchase-price example at three incomes

The table uses a hypothetical 6.50% fixed rate over 360 months, no other debt, no HOA, $150 monthly homeowners insurance, and annual property tax equal to 1.1% of price. The 10%-down column adds hypothetical monthly PMI equal to 0.50% of the initial loan annually. These are modeling inputs, not market quotes or national cost estimates.

Prices are rounded down to whole dollars to stay within the unrounded allowance. They exclude closing cash and reserves, and the displayed payment allowances are rounded to cents. The price is calculated by subtracting fixed monthly insurance from the allowance and dividing by the combined monthly cost per dollar of price: mortgage payment factor × financed share + property-tax rate ÷ 12 + applicable PMI rate × financed share ÷ 12. Add HOA dues to the fixed expenses before solving.

A larger down payment reduces the financed balance and may change mortgage-insurance requirements, but also uses more liquid cash. A lower purchase price, a different property, or continued renting can change the whole budget. There is no single dollars-of-house penalty for each $100 of debt: the result depends on which constraint binds, the loan terms and property costs.

What lenders actually evaluate

Fannie Mae's published guidance sets a 36% maximum total DTI for manually underwritten loans, allowing up to 45% with specified credit and reserve requirements. Its Desktop Underwriter maximum is 50%, subject to exceptions and the rest of the eligibility assessment. These are program limits, not approval probabilities; lenders can apply more conservative standards. Other programs have their own rules.

Qualifying income is not always the same as your latest pay stub or best sales month. Ask the lender how it treats variable income, student debt and other obligations in your file. A ratio within a published limit does not establish eligibility for a particular property, loan amount or rate.

Include costs outside principal and interest

The CFPB's homebuying budget guidance includes property taxes, insurance, mortgage insurance and association charges, plus separate provision for maintenance, repairs and utilities. It estimates typical buyer closing costs at 2%–5% of price, excluding the down payment; your Loan Estimate supplies a transaction-specific estimate.

For a particular listing, check assessment rules and exemptions you would actually receive, obtain insurance quotes, review HOA budgets and assessments, and account for near-term repairs. A seller's current tax or insurance bill may not be your bill. Fixed-rate principal and interest does not freeze those other costs.

PMI may be required on conventional loans with less than 20% down; the premium and payment structure vary. For covered borrower-paid PMI, CFPB guidance distinguishes an 80%-of-original-value cancellation request with conditions from scheduled 78% automatic termination when current. FHA and lender-paid insurance differ. Our PMI guide explains scope, payment-history and timing conditions.

Turn the estimate into a comparison

Build a budget for two or three actual properties, using comparable loan quotes and enough remaining cash for your planned reserves. The Loan Estimate explainer shows where to compare payment components, closing costs and cash to close. Test higher nonmortgage costs and a lower-income period as well as the expected case.

If the plan only works with a raise, a future refinance or perfect repair costs, that dependency belongs in the decision. Compare the alternative in our rent-versus-buy guide; approval alone cannot resolve it.