The 28/36 Rule Explained: Can You Afford That Home?

susiebraskett
Jul 2
2 min read

One of the most common questions homebuyers ask is:“How much home can I actually afford?”While your mortgage pre-approval gives you a rough number, there’s a smarter, more sustainable way to decide—and it starts with the 28/36 rule.

Let’s break it down and see how this simple formula can help you avoid becoming “house poor” and buy with confidence.

What Is the 28/36 Rule?

The 28/36 rule is a guideline used by lenders—and savvy buyers—to determine how much of your income should go toward housing and debt.

28% of your gross monthly income (before taxes) should go toward housing costs
36% of your gross monthly income should go toward total monthly debt, including your housing

This rule helps ensure you’ll have enough left over for savings, emergencies, and daily living—not just your mortgage.

Let’s Run the Numbers

Say you earn ₱100,000 per month (or $6,000 USD for international readers):

28% for housing = ₱28,000/month maximum for mortgage, taxes, insurance, and HOA
36% for total debt = ₱36,000/month max for housing + credit cards, car loans, student loans, etc.

If your non-housing debt (e.g., car loan + credit cards) is ₱8,000/month, that leaves you with ₱28,000/month to spend on housing—the same as the 28% cap.

What Counts as "Housing Costs"?

Your housing payment includes more than just your loan:

Mortgage principal + interest
Property taxes
Homeowners insurance
Private mortgage insurance (PMI)
HOA fees (if applicable)

Make sure you include all of these in your estimate.

What Counts as “Debt”?

Your total debt includes:

Monthly minimum credit card payments
Auto loans
Student loans
Personal loans
Any other recurring debt obligations

Lenders use this to calculate your Debt-to-Income (DTI) ratio, which is critical for loan approval.

Why the 28/36 Rule Matters

It protects you from overextending.Just because you're approved for a higher loan doesn't mean you should take it.
It prepares you for the long term.It ensures you can still save, invest, and handle unexpected costs after moving in.
It improves your mortgage approval chances.Lenders love borrowers with low debt ratios—it shows stability and lowers risk.

When to Adjust the Rule

The 28/36 rule is a great guideline, but it’s not one-size-fits-all:

If you live in a low-cost area, you may be able to go lower and save more.
If you have no other debt, you might stretch the 28% housing budget a little.
If you’re buying in a high-cost-of-living city, lenders may approve higher ratios—but that doesn’t mean you should max out.