The 28/36 Rule Explained: Limits, Math and Real DTI Caps
The 28/36 rule caps housing at 28% and total debt at 36% of gross income. See the math, worked examples and DTI limits for conventional, FHA and VA loans.
By Awais, Founder and editor-in-chiefPublished
The 28/36 rule says your monthly housing costs should be no more than 28% of your gross monthly income, and all your monthly debt payments, housing included, no more than 36%. On a $6,000 monthly income, that means a housing payment of up to $1,680 and total debt payments of up to $2,160.
It is a rule of thumb, not a law or a lending requirement. Many lenders approve borrowers well above 36%. This guide explains how to apply the rule, where the numbers come from, and what the actual limits are for the main US loan types. To check your own numbers, use the debt-to-income ratio calculator.
The two ratios
Back-end ratio = all monthly debt payments ÷ gross monthly income ≤ 36%
Housing payment means the full monthly cost of the home: principal, interest, property tax and homeowners insurance (often shortened to PITI), plus mortgage insurance and HOA dues if you pay them. It is not just the loan payment.
Debt payments are the minimum payments on recurring debts that show on your credit report or are set by a court: car loans and leases, student loans, credit card minimums, personal loans, child support and alimony. Utilities, phone bills, groceries and insurance premiums other than homeowners insurance do not count.
Gross income is before tax and deductions. For a salaried worker it is annual salary ÷ 12. For self-employed people, lenders usually average the last two years of net profit from tax returns, which is often much lower than what you bill.
Worked example 1: one income, a car loan
Jordan earns $84,000 a year, or $7,000 a month gross. They pay $420 a month on a car loan and $150 on a student loan.
| Limit | Calculation | Result |
|---|---|---|
| Housing cap (28%) | $7,000 × 0.28 | $1,960 |
| Total debt cap (36%) | $7,000 × 0.36 | $2,520 |
| Room for housing under 36% | $2,520 − $570 | $1,950 |
| Housing budget | lower of the two | $1,950 |
The binding limit is the back-end one, by $10. With no car loan, Jordan’s housing budget would be the full $1,960; with a $700 car payment, it would fall to $1,670.
That $1,950 has to cover tax and insurance as well as the loan. If those come to $450 a month, about $1,500 is left for principal and interest. The mortgage calculator turns that into a loan amount at today’s rates, and the house affordability calculator adds the down payment to give a price.
Worked example 2: a couple with credit card debt
Priya and Sam earn $11,500 a month together. They have a $380 car payment, $95 in credit card minimums and $260 of student loans: $735 in total.
- Housing cap: 11,500 × 0.28 = $3,220
- Total debt cap: 11,500 × 0.36 = $4,140, minus $735 = $3,405
Here the 28% front-end limit binds, so their housing budget is $3,220. Paying off the credit cards would not raise it. Only more income would.
This is the useful part of having two ratios: it tells you whether debt or income is your constraint.
Quick reference table
| Gross annual income | Monthly income | 28% housing cap | 36% total debt cap |
|---|---|---|---|
| $40,000 | $3,333 | $933 | $1,200 |
| $60,000 | $5,000 | $1,400 | $1,800 |
| $80,000 | $6,667 | $1,867 | $2,400 |
| $100,000 | $8,333 | $2,333 | $3,000 |
| $120,000 | $10,000 | $2,800 | $3,600 |
| $150,000 | $12,500 | $3,500 | $4,500 |
What lenders actually allow
The 28/36 rule is older and stricter than most current underwriting. Here is what the main programmes publish:
| Loan type | Housing ratio | Total debt ratio |
|---|---|---|
| Conventional (Fannie Mae), manual underwriting | No separate limit | 36%, up to 45% with credit score and reserve requirements |
| Conventional (Fannie Mae), automated (DU) | No separate limit | Up to 50% |
| FHA | 31% guideline | 43% guideline; higher with compensating factors |
| VA | No separate limit | 41% guideline, plus a residual income test |
The Consumer Financial Protection Bureau’s own worksheet suggests keeping total debts at 36% or less, and notes that some lenders go to 43% or higher. Since the 2021 change to the “General Qualified Mortgage” rule, there is no fixed 43% legal ceiling for a qualified mortgage either. Lenders must still consider your DTI, but the limit is now set by the loan’s pricing rather than a single ratio.
So a lender may approve you at 45% or even 50%. That tells you what you can borrow, not what you can comfortably pay.
Why 28/36 is still worth using
A DTI of 50% on gross income is a much bigger share of your take-home pay. If tax, retirement contributions and health insurance take 25% of a $7,000 paycheck, you take home $5,250. A 50% DTI ($3,500 of debt payments) would then eat 67% of what actually reaches your account, before food, utilities, childcare or savings.
At 36%, the same debts ($2,520) are 48% of take-home pay. That is still a lot, but it leaves room for an emergency fund, retirement saving and the repairs every house needs.
Where the rule falls short
- It ignores your other costs. Childcare, commuting and medical bills don’t count toward DTI, but they’re real. A family paying $1,500 a month for daycare has less room than the ratio suggests.
- It ignores taxes and location. 28% of gross income leaves more to live on in a state with no income tax than in a high-tax state.
- It’s too generous at low incomes and too strict at high ones. At $40,000 a year, a $933 housing payment can leave very little for everything else. At $300,000, 28% is $7,000 a month, more than many people would want to spend.
- It doesn’t count the costs of owning. Maintenance often runs at 1% or more of the home’s value a year. Budget for it separately.
How to lower your ratios
- Pay off small debts with high payments. Clearing a $1,800 balance with a $90 minimum lowers your DTI more than paying $1,800 off a large loan.
- Don’t take on new credit before you apply. A new car payment can cut your housing budget almost one-for-one.
- Make a bigger down payment. It lowers the loan, the payment and possibly mortgage insurance.
- Look at the full housing cost. Property tax and HOA dues vary a lot between neighbourhoods. A home with lower taxes can fit under 28% when a cheaper-looking one doesn’t.
If you have several debts to clear first, the debt snowball vs avalanche guide shows which order saves more. For a broader look at budget, down payment and closing costs, read how much house can I afford. Terms such as PITI, LTV and PMI are defined in our finance glossary.
FAQ
Is the 28/36 rule based on gross or net income?
Gross income, before tax. That’s why it can feel tight in practice: your actual paycheck is smaller than the number the rule is built on.
Does rent count toward the 36%?
When you apply for a mortgage, your current rent is replaced by the new housing payment, so it isn’t counted twice. For renters using the rule as a budget guide, rent plays the same role as the housing payment.
What is a good debt-to-income ratio?
36% or less in total is the traditional comfortable target, with 28% or less for housing. Lower is better: it leaves more room for saving and for surprises.
Can I get a mortgage with a 45% DTI?
Often, yes. Fannie Mae allows up to 45% on manually underwritten loans with enough credit score and reserves, and up to 50% through its automated system. FHA loans can go above 43% with compensating factors. Whether that payment is affordable for you is a separate question.
Sources
- CFPB: What is a debt-to-income ratio?
- CFPB: Debt-to-income calculator worksheet (36% guidance)
- Fannie Mae Selling Guide B3-6-02: Debt-to-Income Ratios
- CFPB: General QM loan definition final rule
- CFPB: What is an FHA loan?
- 38 CFR 36.4340: VA underwriting standards (debt-to-income and residual income)
This guide is general information, not financial advice. Lender rules change; ask a lender or HUD-approved housing counselor about your situation.