The 28/36 rule is the standard lenders use, but your actual number depends on what else you owe
Most mortgage lenders use the 28/36 rule as their benchmark. This means your monthly mortgage payment (including property tax, insurance, and homeowners association fees if you have them) should not exceed 28 percent of your gross monthly income. Your total debt payments—mortgage, car loans, credit cards, student loans, everything—should not exceed 36 percent of gross income.
These are not hard limits. Some lenders will go higher if you have a strong credit score, a large down payment, or stable income history. Others will stay stricter. The point is that lenders use these percentages to decide how much they will lend you, which in turn determines what price range you can actually afford.
What matters more than the rule itself is understanding what happens when you exceed it. If your mortgage payment is 35 percent of income instead of 28 percent, you have less money left over for emergencies, maintenance, or anything else. A single job loss or major repair becomes a crisis instead of an inconvenience.
Key Takeaways
- The 28/36 rule means your mortgage payment should be no more than 28 percent of gross monthly income, and all debt payments combined should not exceed 36 percent.
- Lenders use these percentages to decide how much to lend, but individual lenders vary—some go higher with strong credit or a large down payment.
- Your actual safe percentage depends on your other debts, job stability, emergency savings, and how much home maintenance costs in your area.
- A mortgage payment that fits the rule on paper can still strain your budget if you have little savings or unpredictable expenses.
How lenders calculate your mortgage payment percentage
Lenders look at your gross monthly income—what you earn before taxes, not what hits your bank account. If you make $60,000 a year, that is $5,000 gross per month. Twenty-eight percent of that is $1,400. That $1,400 is your maximum mortgage payment under the 28 percent rule.
That $1,400 includes your principal and interest, but also property taxes, homeowners insurance, and mortgage insurance if your down payment was less than 20 percent. It does not include utilities, maintenance, or HOA fees (though some lenders count HOA fees in the calculation). So a house that costs $300,000 might have a principal-and-interest payment of $1,200, but once you add taxes and insurance, the total hits $1,400 or higher.
The 36 percent rule works the same way. If you have a $400 car payment and $200 in student loan payments, that is $600 in debt before your mortgage. Add a $1,400 mortgage and you are at $2,000 total debt. For that to stay under 36 percent of income, you need to earn at least $5,556 gross per month. If you earn $5,000, you are over the limit.
Why the rule exists and what it does not account for
The 28/36 rule was created decades ago based on historical data about which borrowers defaulted on mortgages. It is a rough screening tool, not a measure of what you can actually afford. It does not know whether you have $50,000 in savings or $500. It does not know whether your job is stable or contract-based. It does not account for regional differences in property taxes, insurance costs, or maintenance expenses.
A house in a state with high property taxes (like New Jersey or Illinois) will have a much higher total payment than the same house in a state with low property taxes (like Texas or Florida). The rule treats them the same. Similarly, a house in an area with frequent hurricanes or earthquakes will have higher insurance costs, which raises your payment percentage without changing the rule.
The rule also assumes you have no other major expenses. If you have a child with medical needs, aging parents you help support, or a long commute that costs money, your actual safe percentage is lower than 28 percent.
What your actual safe percentage should be
A better approach is to work backward from your actual budget. Calculate your monthly take-home pay (what you actually receive after taxes). Subtract your non-negotiable expenses: utilities, food, insurance, transportation, childcare, debt payments, and savings. What is left is what you can safely spend on a mortgage payment.
Most financial advisors suggest keeping your mortgage payment to 25 percent of gross income or less if you want breathing room. This leaves you with more cushion for emergencies, home repairs, and life changes. A roof replacement costs $10,000 to $20,000. A furnace replacement costs $5,000 to $10,000. If your mortgage payment is 28 percent of income and you have no savings, these repairs become debt.
If you have significant other debts (car loans, student loans, credit cards), your safe mortgage percentage is lower. If you have six months of expenses in savings and a stable job, you can go higher. If you are self-employed or work on commission, you should go lower.
How down payment size affects the percentage
A larger down payment lowers your monthly payment, which lowers your payment percentage. It also affects whether you pay mortgage insurance. If you put down less than 20 percent, you pay private mortgage insurance (PMI), which adds $100 to $300 per month depending on the loan size and your credit score. This increases your total payment percentage.
A 20 percent down payment eliminates PMI and lowers your payment. A 10 percent down payment means you pay PMI for the life of the loan (or until you reach 20 percent equity and request removal). A 5 percent down payment means higher PMI costs. This is why a larger down payment makes a real difference in what you can afford—it is not just about borrowing less, it is about avoiding the insurance cost that pushes your percentage higher.
What happens if you exceed the rule
If your lender approves you for a mortgage that is 35 percent of income instead of 28 percent, you will get the loan. But you will have less money left over each month. A $100 difference in your mortgage payment is $1,200 per year that does not go into savings, emergency repairs, or other goals.
The risk is not when ready. You will make your payment. But when something breaks—a car repair, a medical bill, a job loss—you have no buffer. You end up using credit cards or taking out a personal loan to cover it. Over time, this debt compounds.
Some borrowers exceed the rule because they have no choice in their market. Housing costs are high relative to local income. In that case, the rule is a warning, not a barrier. It means you should build savings aggressively, keep other debts low, and have a plan for what happens if your income drops.
Regional variation in what the percentage means
The same mortgage payment percentage means different things depending on where you live. In San Francisco or New York, a mortgage that is 28 percent of income might be the only housing option available. In rural areas, 28 percent might buy you a house with land and a garage. The rule does not adjust for this.
Property taxes also vary wildly. In Cook County, Illinois, property taxes are roughly 0.8 percent of home value per year. In Wyoming, they are roughly 0.6 percent. In New Jersey, they are roughly 0.9 percent. On a $400,000 house, that difference is $800 to $1,200 per year in taxes alone. Over a 30-year mortgage, that is $24,000 to $36,000 in additional cost, which raises your payment percentage significantly.
Insurance costs also vary by region and by the specific house. Flood insurance, earthquake insurance, and hurricane insurance add hundreds per month in high-risk areas. The 28/36 rule does not account for this regional variation, so you need to calculate your actual costs for your specific location.
Frequently Asked Questions
Can I get a mortgage if my payment is above 28 percent of income?
Yes. Lenders often approve mortgages up to 35 or even 40 percent of income, especially if you have a strong credit score, a large down payment, or low other debts. The 28 percent rule is a guideline, not a hard cutoff. However, a higher percentage means less financial cushion if something goes wrong.
Should I use gross income or take-home pay to calculate my percentage?
Lenders use gross income (before taxes). But when you are deciding what you can actually afford, use take-home pay and subtract all your real expenses. The lender's calculation tells you what they will lend. Your calculation tells you what you can safely afford.
Does the 28 percent rule include property taxes and insurance?
Yes. The 28 percent rule includes principal, interest, property taxes, homeowners insurance, and mortgage insurance if applicable. It does not include utilities, maintenance, or HOA fees (though some lenders count HOA fees). Check with your lender about what they include in their calculation.
What if my income varies month to month?
If you are self-employed or work on commission, lenders typically average your income over two years. But for your own budget, use a conservative estimate—the lower end of what you expect to earn. This gives you a safety margin when income is lower than average.
Is 28 percent the same as what I can afford?
No. The 28 percent rule is what lenders will lend. What you can afford depends on your savings, other expenses, job stability, and how much risk you are comfortable with. Many people can afford less than what lenders will approve them for.