What Is the 28/36 Rule?
The 28/36 rule is a classic mortgage qualification guideline used by lenders to assess whether a borrower can comfortably handle a mortgage. It has two components:
- The 28 (front-end ratio): Your total monthly housing costs — principal, interest, taxes, and insurance (PITI) — should not exceed 28% of your gross monthly income.
- The 36 (back-end ratio): All your monthly debt payments combined — housing plus auto loans, student loans, credit card minimums, and other obligations — should not exceed 36% of your gross monthly income.
Gross income means pre-tax income — not your take-home pay. If you earn $84,000/year, your gross monthly income is $7,000, even if your actual paycheck is significantly less after taxes.
Front-End vs Back-End Ratio
The front-end ratio isolates your housing cost. The back-end ratio is the more comprehensive view lenders use for final approval decisions — it tells them whether, after housing and all other debts, you have enough income remaining to live comfortably and avoid default.
What Counts as Housing Cost?
Lenders typically include all of these in PITI:
- Principal and interest (your actual mortgage payment)
- Property taxes (usually 1/12 of annual tax bill, held in escrow)
- Homeowner's insurance (required by lenders)
- HOA fees (if applicable — most lenders include these)
- Mortgage insurance premiums (PMI if down payment under 20%, or MIP for FHA)
Income Thresholds by Salary
| Annual Salary | Gross Monthly | Max Housing (28%) | Max Total Debt (36%) |
|---|---|---|---|
| $50,000 | $4,167 | $1,167/mo | $1,500/mo |
| $75,000 | $6,250 | $1,750/mo | $2,250/mo |
| $100,000 | $8,333 | $2,333/mo | $3,000/mo |
| $150,000 | $12,500 | $3,500/mo | $4,500/mo |
| $200,000 | $16,667 | $4,667/mo | $6,000/mo |
When Lenders Allow Higher DTI
The 28/36 rule is a conservative guideline. Many lenders approve borrowers beyond these thresholds with compensating factors:
- FHA loans: Allow up to 31% front-end and 43% back-end DTI
- VA loans: No strict front-end limit; back-end up to 41% or higher with residual income
- Conventional with strong credit: Some programs allow up to 45-50% back-end with excellent credit scores and reserves
- Strong compensating factors: Large down payment, substantial savings, excellent credit history
✅ Best practice: Use 28/36 as your target, not your ceiling. Staying under both thresholds gives you a comfortable buffer for unexpected expenses, job changes, or rising costs — and gives you negotiating power with lenders.
ℹ️ Educational Disclaimer: This calculator is for planning purposes only. Results are estimates based on your inputs. Actual mortgage qualification depends on credit score, loan type, lender guidelines, reserves, and other factors. This does not constitute financial or lending advice. Consult a licensed mortgage professional for personalized guidance.
Frequently Asked Questions
What is a good DTI ratio for a mortgage?
Under the 28/36 rule, a front-end ratio below 28% and back-end ratio below 36% is considered strong. Most conventional lenders get comfortable at 43% back-end DTI or below. Under 36% back-end gives you the most options and typically the best rates.
Do I use gross or net income for DTI?
Always gross income — pre-tax, before any deductions. This is the standard lenders use. If you earn $7,000/month gross but take home $5,200, use $7,000 for DTI calculations.
Do credit card balances affect DTI?
Lenders use your minimum required monthly payment, not the full balance. So a $5,000 credit card balance with a $100 minimum payment adds $100 to your monthly debt total — not $5,000. Paying down balances reduces your minimum and therefore your DTI.
What if my back-end DTI is over 36%?
You may still qualify for a mortgage, especially with FHA, VA, or conventional programs with compensating factors. But you should consider paying down existing debt, increasing income, or reducing your target home price before applying. Use the capacity numbers above to see exactly how much you need to reduce.
Is HOA included in the front-end ratio?
Most lenders include HOA fees in your front-end housing ratio since they are a required monthly obligation tied to the property. Enter your HOA in the calculator above — it's included in PITI automatically.