The standard guideline is 28 percent of your gross monthly income
Lenders use a debt-to-income ratio to decide whether to approve a mortgage. The most common rule is that your housing payment—mortgage, property taxes, homeowners insurance, and HOA fees if you have them—should not exceed 28 percent of your gross monthly income (the money you earn before taxes are taken out).
This is called the front-end ratio or housing ratio. If you earn $5,000 a month gross, your housing payment should stay under $1,400. If you earn $8,000 a month, it should stay under $2,240.
Some lenders will go higher—up to 31 or 33 percent—if you have strong credit, a large down payment, or low other debts. But 28 percent is the baseline most mortgage companies start with, and it is the number used by government-backed loans like FHA and VA mortgages.
Key Takeaways
- Your housing payment should not exceed 28 percent of your gross monthly income; some lenders allow up to 31 or 33 percent depending on your credit and down payment.
- Your total debt payments—housing plus car loans, credit cards, student loans—should not exceed 43 percent of gross income, which is the back-end ratio lenders check.
- Gross income means money before taxes; if you are self-employed or have variable income, lenders average your earnings over the past two years.
- Property taxes, homeowners insurance, and HOA fees count toward your housing payment, not just the mortgage itself.
- You can afford more house if you have a larger down payment, excellent credit, or very low other debts, but staying below 28 percent gives you breathing room for emergencies.
Why lenders use the 28 percent rule
The 28 percent threshold exists because it is the point where housing costs historically start to strain a household's ability to pay other bills. If you spend more than that on housing, you have less money left for food, utilities, car payments, insurance, childcare, and medical expenses. When an emergency happens—a job loss, a medical bill, a car repair—you have no cushion.
Lenders care about this because if you cannot pay other bills, you are more likely to stop paying your mortgage too. The 28 percent rule is not a law; it is a risk calculation based on decades of mortgage data.
That said, the rule is a floor, not a ceiling. Just because a lender will approve you for 28 or 31 percent does not mean you should spend that much. Your own financial situation—how stable your income is, how much you have saved, what other debts you carry—matters more than what a lender says you can afford.
The back-end ratio: your total debt matters too
Lenders also check your back-end ratio, which includes all your debt payments, not just housing. This includes your mortgage, car loans, student loans, credit card minimums, child support, and any other monthly obligations. The limit is usually 43 percent of gross income, though some lenders go to 50 percent.
If you earn $5,000 a month and already have a $400 car payment and $200 in student loan payments, your housing payment can only be $1,350 to stay under the 43 percent back-end limit ($5,000 × 0.43 = $2,150; $2,150 − $400 − $200 = $1,350). The front-end rule would allow $1,400, but the back-end rule is tighter in this case.
Before you apply for a mortgage, add up every monthly debt payment you have. Then calculate what is left for housing under the 43 percent rule. That is often a more realistic ceiling than the 28 percent front-end rule alone.
How lenders calculate your income
If you are a W-2 employee, lenders use your gross salary from your pay stub or tax return. If you are self-employed, a freelancer, or have commission income, they average your earnings over the past two years using your tax returns. If your income has grown, they may use only the most recent year, but if it has dropped, they use the average.
Bonus income, overtime, and commission are counted only if you have received them for at least two years and they are likely to continue. A new job means they usually want to see a two-year history in the same field, though some lenders will count a job offer letter if you are changing employers in the same industry.
If you receive alimony, child support, or Social Security, that counts as income. Rental income counts too, but lenders subtract 25 percent for maintenance and vacancy before adding it to your total.
What counts in your housing payment
Your housing payment includes four things: principal and interest on the mortgage, property taxes, homeowners insurance, and HOA fees if you belong to a homeowners association. This total is sometimes called PITI (principal, interest, taxes, insurance), or PITI plus HOA.
When you are shopping for a house and calculating what you can afford, do not forget the taxes and insurance. A $300,000 mortgage at 7 percent interest costs about $2,000 a month in principal and interest alone. But if your property taxes are $300 a month and insurance is $150, your real housing payment is $2,450—and that is before HOA fees if you have them.
Property tax rates vary widely by state and county. Insurance costs depend on the house value, your location, and your credit score. Get a quote from an insurance company and research property tax rates in the area before you assume what your payment will be.
When you can afford more than 28 percent
Some borrowers can safely spend more than 28 percent on housing. If you have a 20 percent down payment, a credit score above 740, and very little other debt, lenders may approve you for 31 or 33 percent. If your income is stable and has been for years, and you have six months of expenses saved, you have more room to stretch.
A larger down payment lowers your monthly payment and reduces the lender's risk, which is why they are willing to bend the 28 percent rule. The same is true if you have paid off your car and student loans—your back-end ratio is lower, so housing can take a bigger slice.
But stretching to 31 or 33 percent should only happen if you have a solid emergency fund and your income is not at risk. If you work in a field with layoffs, or you are the only earner in your household, staying closer to 28 percent is safer.
How to calculate what you can afford
Start with your gross monthly income. Multiply it by 0.28 to find the front-end limit. Then multiply it by 0.43 and subtract all your other monthly debt payments to find the back-end limit. Whichever number is lower is your housing payment ceiling.
Example: You earn $6,000 a month gross. You have a $350 car payment and $150 in student loans.
- Front-end limit: $6,000 × 0.28 = $1,680
- Back-end limit: $6,000 × 0.43 = $2,580; $2,580 − $350 − $150 = $2,080
- Your ceiling is $1,680 (the lower of the two)
That $1,680 must cover your mortgage payment, property taxes, insurance, and HOA fees. Use an online mortgage calculator to see what loan amount that translates to in your area, accounting for local tax and insurance rates.
What happens if your housing payment is too high
If you buy a house with a payment above 28 or 31 percent, you are not breaking a law—lenders approved it, so it is legal. But you are taking on financial risk. When an unexpected expense comes up, you have less money to handle it. If you lose income or face a medical emergency, your mortgage is the largest bill you have, and it is the hardest to reduce quickly.
People who stretch too far often end up house-poor: they can pay the mortgage, but they cannot save, cannot handle emergencies, and cannot enjoy their life outside the house. Over time, this stress can lead to missed payments, which damage your credit and can result in foreclosure.
The 28 percent rule exists because it works. Staying below it gives you financial flexibility and peace of mind.
Frequently Asked Questions
Does my down payment size change how much house I can afford?
Yes. A larger down payment lowers your monthly payment and your loan amount, which means you can afford a more expensive house while staying under the 28 percent rule. A 20 percent down payment also removes the requirement for mortgage insurance, which saves you money each month. A smaller down payment (3 to 5 percent) means a higher monthly payment and mortgage insurance costs, so you will may have access to for less house.
What if my income varies month to month?
Lenders average your income over the past two years if it is variable. If you are self-employed or work on commission, bring two years of tax returns. If your income has grown, they may use only the most recent year; if it has dropped, they use the average. Some lenders require a higher credit score or larger down payment for variable income.
Can I include my spouse's income if we are not married?
No. Only married couples can combine income on a mortgage application. If you are unmarried, each person applies separately, and each person's housing payment is calculated on their own income. Some lenders allow co-borrowers who are not married, but they still calculate debt-to-income separately for each person.
What if I have a lot of student loan debt?
Student loans count toward your back-end ratio. If you owe $500 a month in student loans, that reduces the amount you can spend on housing. Paying down student loans before you apply for a mortgage will increase your housing budget. Some lenders use a calculated payment based on your loan balance rather than your actual payment if your loans are in deferment or forbearance.
Is 28 percent the same for all types of mortgages?
The 28 percent front-end ratio is standard for FHA, VA, and conventional loans. Some lenders use 29 or 31 percent depending on credit score and down payment. Jumbo loans (over $766,550 in most areas) may have stricter ratios. Always ask your lender what ratio they use before you apply.