The 28/36 Rule — Your Starting Point
Every financial advisor starts with the same rule: the 28/36 rule. It's been the gold standard for home affordability for decades.
The 28/36 Rule Explained
28%: Your monthly mortgage payment (principal + interest + taxes + insurance) should not exceed 28% of your gross monthly income.
36%: Your total monthly debt payments (mortgage + car + student loans + credit cards) should not exceed 36% of your gross monthly income.
So if you earn $7,000/month gross:
- Maximum mortgage payment: $7,000 × 28% = $1,960/month
- Maximum total debt: $7,000 × 36% = $2,520/month
How Much House Does That Buy in 2025?
With mortgage rates around 6.8% in 2025, here's what different income levels can afford:
| Annual Income | Max Monthly Payment | Estimated Home Price |
|---|---|---|
| $50,000 | $1,167 | ~$180,000 |
| $75,000 | $1,750 | ~$270,000 |
| $100,000 | $2,333 | ~$360,000 |
| $150,000 | $3,500 | ~$540,000 |
| $200,000 | $4,667 | ~$720,000 |
Assumes 20% down payment, 6.8% rate, 30-year fixed, including property tax and insurance estimates.
The 5 Factors That Determine Your Affordability
1. Your Gross Income
Lenders use your gross income (before taxes) to calculate affordability. Include all income sources — salary, freelance, rental income, etc. If you're buying with a partner, combine both incomes.
2. Your Down Payment
The more you put down, the less you borrow — which means lower monthly payments and less interest paid overall.
Putting less than 20% down means you'll pay PMI (Private Mortgage Insurance) — typically 0.5% to 1.5% of the loan amount per year, adding $100-$300/month to your payment.
3. Interest Rate
In 2025, rates are hovering around 6.5-7%. Even a 0.5% difference has a massive impact:
| Rate | Monthly Payment (300k loan) | Total Interest (30yr) |
|---|---|---|
| 6.5% | $1,896 | $382,560 |
| 6.8% | $1,953 | $403,080 |
| 7.0% | $1,996 | $418,560 |
| 7.5% | $2,098 | $455,280 |
4. Loan Term
15-year mortgages have higher monthly payments but you pay dramatically less interest. 30-year mortgages are more affordable month-to-month but cost much more over time.
5. Your Debt-to-Income Ratio (DTI)
Lenders look at your DTI ratio — your total monthly debt divided by gross monthly income. Most lenders want DTI below 43%. The lower the better.
Hidden Costs Most Buyers Forget
⚠️ Don't Forget These Costs
- 🏠 Property Tax: 0.5% – 2.5% of home value per year
- 🔒 Homeowner's Insurance: ~$1,200-$2,000/year
- 🔧 Maintenance: Budget 1% of home value per year
- 📋 HOA Fees: $0-$1,000+/month depending on community
- 📝 Closing Costs: 2%-5% of loan amount (one-time)
- PMI: If down payment < 20%
Quick Affordability Formula
A simple rule of thumb: You can afford a home that costs 3-5x your annual salary.
- $60,000/year salary → $180,000 – $300,000 home
- $100,000/year salary → $300,000 – $500,000 home
- $150,000/year salary → $450,000 – $750,000 home
This is a rough estimate. Your actual affordability depends on your down payment, existing debt, and credit score.
How to Calculate Your Exact Number
The most accurate way is to simply run the numbers. Use our free mortgage calculator to plug in your specific situation — home price, down payment, rate, and term — and see your exact monthly payment instantly.
Calculate Your Mortgage Payment
Enter your numbers and see your exact monthly payment, total interest, and full amortization schedule.
Use Free Calculator →Bottom Line
In 2025, with rates above 6%, buying a home requires careful math. The 28% rule is a great starting point, but your real number depends on your down payment, existing debts, credit score, and local property taxes.
Before talking to any lender, know your numbers. Run the calculator, understand your monthly payment, and make sure it fits comfortably within your budget — not just technically, but practically.
A mortgage you can "afford" on paper but strains you every month is not a good mortgage.
Frequently Asked Questions
How much house can I afford on a $70,000 salary?
On a $70,000 salary ($5,833/month gross), the 28% rule gives you a maximum payment of $1,633/month. With 20% down and a 6.8% rate over 30 years, that corresponds to roughly a $250,000-$260,000 home. Your actual number depends on existing debt and credit score.
What is the 28/36 rule for mortgages?
The 28/36 rule states that your monthly mortgage payment should not exceed 28% of your gross monthly income, and your total monthly debt payments (mortgage + car + student loans + credit cards) should not exceed 36% of your gross monthly income. Most lenders use this as a guideline for approval.
How much do I need for a down payment?
The minimum is 3% for conventional loans (3.5% for FHA). However, putting down less than 20% requires PMI (Private Mortgage Insurance), adding $100-300/month. The 20% down payment is the sweet spot — no PMI, lower monthly payment, and better interest rates.
Does the 28% rule still apply in 2025?
The 28% rule is still a valid starting point, but in expensive markets in 2025, many buyers are spending 30-35% of income on housing. The key is that your total debt (36% rule) stays manageable and you still have room to save for retirement and emergencies.
What credit score do I need to buy a house?
Minimum credit score is 580 for FHA loans and 620 for conventional loans. However, to get the best mortgage rates, you want a score of 720 or higher. The difference between a 620 and 760 score can mean $100,000+ more in interest over a 30-year mortgage.