How Much Mortgage Payment Can You Actually Afford Each Month

The 28/36 Rule: Where Lenders Draw the Line

Most lenders use two numbers to decide how much you can borrow: the 28% rule and the 36% rule. The 28% rule says your housing payment (mortgage, property tax, insurance, and homeowners association fees) should not exceed 28% of your gross monthly income. The 36% rule says all your debt payments combined—housing plus car loans, credit cards, student loans, and everything else—should not exceed 36% of gross income.

These are not laws. They are the thresholds most conventional lenders use to decide whether to approve you. If you earn $5,000 a month gross, a lender will typically cap your housing payment at $1,400 (28% of $5,000). If your other debts total $500 a month, your total debt cannot exceed $1,800 (36% of $5,000), which leaves $300 for the mortgage payment itself. In this case, the 36% rule is the tighter constraint.

Some lenders will go higher—up to 43% or even 50% of gross income—if you have a large down payment, excellent credit, or significant savings. Others will go lower if your income is unstable, your credit is weak, or you have little emergency savings. The numbers are a starting point, not a may provide.

Key Takeaways

• Lenders typically allow housing payments up to 28% of your gross monthly income and total debt payments up to 36%, though these thresholds vary by lender and your financial profile.
• Your housing payment includes the mortgage principal and interest, property taxes, homeowners insurance, and HOA fees—not just the loan itself.
• The 36% rule often becomes the limiting factor because it includes all your existing debts, not just housing.
• What a lender will approve and what you can actually afford to pay without financial strain are two different numbers; your personal comfort matters more than the formula.
• Your down payment size, credit score, employment history, and cash reserves all shift how much a lender will lend you, even if your income stays the same.

How to Calculate Your Personal Ceiling

Start with your gross monthly income—the number before taxes, not your take-home pay. If you are paid annually, divide by 12. If you are paid hourly, multiply your hourly rate by the number of hours you typically work per week, then multiply by 52 weeks and divide by 12. If your income varies (you are self-employed or work on commission), use an average of the past two years.

Multiply that number by 0.28. That is your maximum housing payment under the 28% rule. Now list every debt you currently owe: car loans, personal loans, credit cards (use the minimum payment, not the balance), student loans, and any other monthly obligations. Add them up. Multiply your gross income by 0.36 and subtract your existing debts. That is your maximum housing payment under the 36% rule. Whichever number is lower is what lenders will typically allow.

Example: You earn $6,000 gross per month. 28% of $6,000 is $1,680. Your car payment is $350, your student loans are $200, and your credit card minimum is $100—total $650. 36% of $6,000 is $2,160. Subtract $650 from $2,160 and you get $1,510. The 36% rule gives you $1,510 for housing; the 28% rule gives you $1,680. The lower number, $1,510, is what most lenders will approve.

What Counts as Your Housing Payment

The housing payment that lenders use in the 28% calculation is not just your mortgage. It includes four things: the mortgage principal and interest, property taxes, homeowners insurance, and homeowners association (HOA) fees if they apply. Lenders call this PITI (Principal, Interest, Taxes, Insurance) plus HOA.

Property taxes and insurance vary wildly by location and property. A $300,000 house in one county might have $400 a month in taxes and insurance; the same house in another county might have $800. When you are shopping for a house, you cannot know these numbers exactly until you have a specific property under contract. Online calculators can give you a rough estimate based on the county, but the real number comes from the title company and insurance quotes.

This is why a lender's pre-approval letter often says something like "up to $1,500 per month for housing" rather than a specific loan amount. The lender knows your income and debts, but not yet which house you will buy or what its taxes and insurance will be. Once you have a property, the lender recalculates using the actual numbers.

The Gap Between What You Can Afford and What You Should Pay

A lender's formula tells you the maximum they will lend. It does not tell you the maximum you should actually pay. Lenders are in the business of lending; they have an incentive to approve you. You are in the business of not going broke.

The 28% and 36% rules assume you have no emergencies, no job loss, no major medical bills, and no desire to save money, take vacations, or retire. They also assume property taxes and insurance will not rise (they do) and that you will not face a major repair (you will). A furnace, roof, or foundation problem can cost $5,000 to $20,000. If your housing payment is already at the lender's maximum, you have no room for that.

Financial advisors often recommend a tighter personal rule: housing should be no more than 25% to 28% of your gross income, and you should have three to six months of expenses in savings before you buy. If the lender approves you for $1,500 a month but you are only comfortable with $1,200, the $1,200 number is the right one. You live with the payment every month; the lender does not.

How Down Payment Size Changes Your Approval

A larger down payment shifts what lenders will approve. With 20% down, you avoid private mortgage insurance (PMI), which adds $100 to $300 a month to your payment depending on the loan size. That PMI cost counts toward your housing payment in the 28% calculation, so a smaller down payment can reduce how much a lender will approve you for, even though the actual loan is larger.

A larger down payment also signals lower risk to the lender. If you have 30% down instead of 5%, the lender knows you have savings and skin in the game. Some lenders will stretch the 28% or 36% rules for borrowers with 25% or more down. Others will tighten them for borrowers with less than 10% down, even if the income and debt numbers would normally may have access to.

Down payment size also affects your interest rate. A borrower with 20% down typically gets a lower rate than a borrower with 5% down, which lowers the monthly payment and can push you into a higher approval amount.

Credit Score and Employment History Matter Too

Your credit score and employment history do not change the 28% or 36% math, but they change whether a lender will use those numbers or stricter ones. A borrower with a 750 credit score and 10 years at the same job may get approved at 43% of gross income. A borrower with a 620 credit score and a job change six months ago may only get approved at 28%.

Lenders also look at how stable your income is. If you are salaried and have been at the same employer for five years, your income is considered stable. If you are self-employed, work on commission, or changed jobs recently, lenders will average your income over two years and may discount it by 10% to 25% to account for variability. This lower income number then feeds into the 28% and 36% calculations, reducing your approval amount.

A recent job change, even to a better-paying job, can lower your approval. Lenders want to see you in the new job for at least two years before they count the full income. Until then, they may use only the income from your previous job or average the two.

Frequently Asked Questions

What if I have a co-signer or spouse with income?

Lenders add both incomes together for the 28% and 36% calculations. If you earn $4,000 and your spouse earns $3,000, the lender uses $7,000 as your household gross income. Both of your debts count toward the 36% limit. If one of you has poor credit or a weak employment history, the lender may discount that person's income or require a larger down payment.

Does my student loan debt count if I'm on an income-driven repayment plan?

Yes. Lenders use the actual monthly payment you are making, not the balance. If you are on an income-driven plan and your payment is $0 because your income is low, some lenders will count $0; others will estimate what your payment would be under a standard 10-year plan and use that number instead. Ask the lender before you apply.

Can I get approved for more if I pay off a credit card?

Yes, if the card has a balance or a high minimum payment. Paying off a $5,000 credit card with a $150 minimum payment frees up $150 in your 36% calculation, which could increase your housing approval by $150 to $200 depending on your income. Closing the card after you pay it off does not help and may hurt your credit score, so leave it open.

What if my income is seasonal or irregular?

Lenders average your income over two years. If you earned $40,000 last year and $50,000 this year, they use roughly $45,000. If your income is highly variable (you are self-employed or work seasonal jobs), lenders may discount it further or require a larger down payment and higher credit score to offset the risk.

Should I max out what the lender approves me for?

No. The lender's approval is the ceiling, not a recommendation. Your actual comfort level should be lower—typically 25% to 28% of gross income for housing, leaving room for emergencies, repairs, and life changes. A house you can afford to buy is not the same as a house you can afford to live in for 30 years.