How Much House Can I Afford in 2025? The 28/36 Rule Explained

The 28/36 Rule: The Starting Point

The most widely used affordability guideline is the 28/36 rule:

• 28%: Your total monthly housing costs (mortgage P&I, property taxes, insurance, HOA) should not exceed 28% of your gross monthly income.
• 36%: Your total monthly debt payments (housing + car loans + student loans + credit cards + all other debt) should not exceed 36% of gross monthly income.

These are guidelines, not hard limits — but most mortgage lenders use variants of this framework to evaluate your application.

Example: The 28/36 Rule in Action

Say your household earns $100,000/year = $8,333/month gross.

• 28% rule: Max housing payment = $8,333 × 0.28 = $2,333/month
• 36% rule: Max total debt = $8,333 × 0.36 = $3,000/month

If you have $500/month in car payments and $300 in student loans, your max housing payment under the 36% rule would be $3,000 − $800 = $2,200. The more binding of the two limits is $2,200/month.

What Home Price Does That Buy in 2025?

At a 30-year mortgage rate of approximately 6.75% (the mid-2025 average) with 20% down:

*Estimates assume 6.75% rate, 20% down, $300/mo taxes+insurance. Use our calculator for precise numbers.

What Lenders Actually Look At: DTI

While the 28/36 rule is a consumer-facing guideline, mortgage lenders primarily look at your Debt-to-Income Ratio (DTI):

• Front-end DTI: Monthly housing costs ÷ gross monthly income (28% guideline)
• Back-end DTI: All monthly debts ÷ gross monthly income (36% guideline)

For conventional loans, lenders typically allow back-end DTI up to 45% with strong compensating factors (large down payment, high credit score). FHA loans may go up to 50%. The 36% rule is conservative — which is actually a good thing for long-term financial health.

The Down Payment Factor

Your down payment dramatically affects what you can afford:

• Less than 20%: You'll pay Private Mortgage Insurance (PMI), typically 0.5–1.5% of the loan annually, adding $100–$300/month to a median home purchase
• 20% down: No PMI — saves significant money over the loan life
• 3–3.5% down: Available via conventional (Fannie/Freddie) or FHA loans — good for first-time buyers who can't wait to save 20%
• VA and USDA loans: 0% down for eligible veterans and rural buyers

Hidden Costs to Include in Your Budget

The monthly payment isn't your only housing cost. Budget for:

• Property taxes: Average 1.1% of home value annually in the US, but ranges from 0.27% (Hawaii) to 2.4% (New Jersey)
• Homeowner's insurance: ~$1,500–$2,000/year for a median home ($125–$167/month)
• Maintenance: Budget 1% of home value annually for repairs ($3,500/year on a $350,000 home)
• HOA fees: $0 to $500+/month depending on community
• Utilities: Typically higher than renting due to larger space