One of the first questions I ask new clients is, "What monthly payment would feel comfortable?" A lot of people have never thought about it that way. They've been thinking about price. The 28/36 rule is a good place to start.

How the rule works

  • 28%: Your total monthly housing payment should be no more than 28% of your gross (before-tax) monthly income.
  • 36%: All of your monthly debt payments combined, housing plus car loans, student loans, credit card minimums and so on, should be no more than 36%.

Your "housing payment" means everything: principal, interest, property taxes, homeowners insurance, mortgage insurance and HOA dues. Leaving out taxes and insurance is the most common budgeting mistake I see.

A worked example

Say your household earns $90,000 a year. That's $7,500 a month before taxes.

  • 28% of $7,500 = $2,100 maximum housing payment
  • 36% of $7,500 = $2,700 maximum total debt

If you have a $400 car payment, your total debt limit leaves $2,300 for housing. But the 28% limit is lower, so $2,100 is your comfortable target. If your other debts were $800 a month, the 36% limit would drop your housing budget to $1,900.

Approved vs. comfortable

Many loan programs approve total debt ratios well above 36%, sometimes 45% to 50% with strong credit or other compensating factors. That flexibility helps people buy in higher-cost areas or with student loans. But being approved for a payment doesn't mean it fits your life.

That's why my budget calculator shows both a "comfortable" price at 28/36 and a "stretch" price at 45%. Seeing them side by side helps you decide how much room you want to leave.

Check it against your real budget

The 28/36 rule uses gross income, but you live on take-home pay. Once you have a target payment, plug it into your actual monthly budget:

  • Take-home pay
  • Minus the new housing payment
  • Minus other debts
  • Minus groceries, utilities, gas, childcare, phone, subscriptions
  • Equals what's left for savings, travel and the unexpected

If that last line is too thin, aim for a lower price or a bigger down payment. Remember that owning also comes with maintenance costs, utilities that may be higher than in an apartment, and the occasional surprise repair.

When we talk, I'll show you what you qualify for, but I'll also ask what you're comfortable with. The goal is a home you enjoy, not one that keeps you up at night.