How much house can you actually afford? The 28/36 rule

Before you get anywhere near a mortgage stress test, there's a more basic question to answer: what's the actual ceiling on what you should be borrowing? That's what the 28/36 rule is for — the debt-to-income guideline most lenders use to decide how much house you qualify for in the first place.

The two numbers

• 28% — your total housing cost (principal, interest, property tax, home insurance, and HOA/condo fees) should be at or below 28% of your gross monthly income.
• 36% — your total debt payments, housing included, should be at or below 36% of gross monthly income once car loans, student loans, credit cards, and other minimums are added in.

Why lenders use gross income, not take-home

The 28/36 rule is built on gross income because that's the industry standard lenders qualify against — it's a looser number than what you'll actually feel hit your bank account. Our own surplus calculator on this site deliberately uses net, take-home income instead, because taxes and deductions are gone before you ever see that money. Treat 28/36 as the lender's ceiling, and your surplus number as the stricter, more honest one.

Where the 36% number breaks down fast

Someone with zero other debt has real room to push housing toward the full 28%. Someone carrying a car loan and student loan payments eats into that 36% total ceiling quickly — which usually means the housing number has to come down below 28% to keep total debt in check, even if the house itself would otherwise 'qualify.'

Backing into the maximum purchase price

Take 28% of gross monthly income → subtract expected property tax + insurance + HOA → what's left is the monthly principal + interest budget. Reverse-engineer that against current mortgage rates and 25/30-year amortization to get the maximum loan size. Add your down payment for the maximum purchase price. Example: $8,000 gross/mo × 28% = $2,240 for all housing. Take-away $600 for tax/insurance/HOA → $1,640 available for P&I. At 6% over 30 years, that supports about $273,000 in mortgage. With 20% down, that's a $341,000 house — often much less than what a first-time buyer expects.

The Canadian variants: GDS and TDS

In Canada, lenders use GDS (Gross Debt Service) and TDS (Total Debt Service) ratios, which are the same idea with slightly different thresholds — typically 39% GDS and 44% TDS for CMHC-insured loans. Uninsured lenders may allow slightly higher. The math and the logic are identical — just the specific caps differ from the US 28/36.

28/36 vs. the stress test — two different questions

The 28/36 rule answers: can you afford this at today's rate, given today's income and debts? The mortgage stress test answers a different question: can you still afford it if rates are higher by the time you renew? A house can pass one and fail the other. Both need to hold up before signing — see the mortgage stress test guide for the second half of this check.

The stricter test smart buyers use

The one number that actually protects a household is total housing cost (all-in, including maintenance reserve) ≤ 25% of take-home. That's tighter than 28% of gross, and it leaves room for the surprises the mortgage payment doesn't cover. Households that stay under this number consistently report far less financial stress than those pushed to the 28/36 ceiling — even when both technically 'qualified.'

Frequently asked questions

Does student loan debt hurt qualification much? Yes — minimums count against the 36% cap even if you're on income-based repayment with a low payment. In the US, some loan types get counted at 1% of balance rather than the actual minimum, which can dramatically shrink borrowing power.

Do lenders count spouse's income if we're buying together? Yes, both incomes and both debts count. Splitting the mortgage between one strong income and one weaker one can be worse than qualifying on the strong one alone if the second brings meaningful debt with it.

The takeaway

28/36 isn't a bank being arbitrary — it's a quick, honest ceiling you can calculate yourself in under a minute, before you fall in love with a listing. Run your own numbers against it first. If a house clears both the 28% and 36% lines and survives a stress test, it's a real candidate. If it only clears one, that's useful information too.