Playbooks
The 28/36 Rule, Worked on a Real Salary
Published September 20, 2026
Ask a lender how much house you can afford and you get the largest number their rules permit. Ask a household budget and you get a smaller one. The 28/36 rule sits between the two: old, simple, and still the fastest way to translate a salary into a defensible price range before emotions and open houses take over.
This playbook works the rule on a $90,000 salary end to end: where the $2,100 housing ceiling actually goes, why property tax and insurance quietly take a third of it, the one-time cash that closing requires on top, and the stress tests worth running before a pre-approval letter does the deciding for you.
The short answer
Lenders cap housing costs near 28% of gross monthly income and total debts near 36%. A $90,000 salary supports about $2,100 of housing per month — principal, interest, taxes and insurance combined, not just the loan payment. Property tax and insurance typically take $400-600 of that, which is the line first-time buyers miss.
The rule, and why lenders still use it
The front-end ratio caps housing costs — principal, interest, property tax and insurance, PITI for short — at 28% of gross monthly income. The back-end ratio caps housing plus every other debt service at 36%. Lenders still start here because decades of defaults trace back to payments written above these lines; modern approvals often stretch to 43-50% with strong credit and reserves, which is precisely why the rule remains useful: it describes the payment that leaves room to live, not the maximum a system will sign.
Worked example: a $90,000 salary
One table gets the whole skeleton in place:
| Line | Amount | Math |
|---|---|---|
| Gross monthly income | $7,500 | $90,000 ÷ 12 |
| Housing ceiling (28%) | $2,100 | PITI combined, not just the loan |
| Debt ceiling (36%) | $2,700 | Housing + car + cards + student loans |
| Room left for other debts | $600 | $2,700 − $2,100 — one $550 car payment nearly erases it |
Where the $2,100 actually goes
The ceiling buys a payment, and the payment has four parts. On a 30-year loan near 6.5%, roughly $1,550-1,650 of the $2,100 buys principal and interest — a loan of about $245,000. Property tax takes 0.5-2.5% of home value per year depending on state and county, call it $250-500 a month on a $300,000 house; homeowner's insurance adds $120-200; and any down payment under 20% adds PMI of roughly 0.5-1.5% of the loan per year. Taxes and insurance together routinely consume $400-600 of the ceiling, which is why two buyers with identical incomes can afford very different houses in different counties.
Assembled: $2,100 of PITI with 20% down supports a house near $305,000. The same payment with 10% down supports less house and more PMI — the down payment does not just reduce the loan, it changes what the monthly ceiling can carry.
The one-time costs buyers forget
- Closing costs of 2-5% of the loan — $6,000-15,000 on a $300,000 house — due in cash at signing, on top of the down payment.
- Escrow prepaids: the first year of insurance plus several months of tax reserves, also collected at signing.
- Moving, immediate repairs and furnishing — budget a few thousand or watch month one of ownership go negative.
- The inspection, $400-600: the cheapest line on this page and the one that earns its cost most often.
Stress-test before you sign
Two tests take ten minutes and predict regret better than any calculator. The rate test: recompute the payment one percentage point higher — if the number breaks the 28% line, an ARM reset or a missed refinance window hurts; fixed-rate buyers can treat it as insurance logic. The income test: could the household carry the payment for three months on one income? Lenders average two years of bonus and overtime rather than counting it fully, and your budget should do the same — approve yourself on base salary and let variable income be the buffer the lenders never give you credit for.
Tools for this lesson
Enter salary, debts and down payment to see the price range the 28/36 rule supports.
Split any price into principal, interest, tax and insurance per month.
Estimate the county tax line that surprises most first-time buyers.
Price the one-time cash needed at signing: 2-5% of the loan, plus prepaids.
Frequently asked questions
- Is the 28/36 rule strict?
- It is a guideline, not a law. Many lenders approve back-end ratios into the 43-50% range with compensating factors such as strong credit or cash reserves. Approved is not the same as comfortable — the rule describes the payment that leaves room to save and absorb repairs.
- How much does property tax add per month?
- Annual rates run roughly 0.5-2.5% of home value depending on the state; on a $300,000 house that is $125-625 a month, usually escrowed into the payment. Check the specific county rather than the state average — the spread within a state often exceeds the spread between states.
- Does a bigger down payment change affordability?
- Twice over: it shrinks the loan, and below 20% it avoids PMI of roughly 0.5-1.5% of the loan per year — $125-375 a month on a $300,000 loan. Crossing the 20% line often buys more monthly headroom than spending the same money on a pricier house.
- What income counts toward affordability?
- Base salary counts fully. Bonuses, overtime and self-employment income usually need a two-year history and get averaged. Budget on the base and treat variable income as the buffer — that is the stress test the lender will not run on your behalf.
Part of a public learning journal — general educational content, not professional advice. See our disclaimer.