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The 28/36 rule is a quick first screen for how much home you can reasonably afford. It says housing costs should stay at or below 28% of gross monthly income, and total monthly debt, including the mortgage, should stay at or below 36% of income. It is a budgeting guideline, not an approval test. Lenders run their own debt-to-income (DTI) calculation with different income bases, different counted obligations, and loan-specific ceilings that can be higher than 36%.
Where the rule comes from and what it says
Fannie Mae’s consumer guide to home affordability (a 2022 PDF titled Smart Homebuying Tips: Building Your Cash Reserves) describes two guidelines. The first is the 28% rule: monthly mortgage expense should not exceed 28% of gross monthly income. The second is the 36% rule: monthly debt should not exceed 36% of net income. The guide states the limits as a general idea and warns that “Many factors can affect these numbers, so only use these rules for a general idea of home affordability.”
The 28% housing guideline
The 28% figure applies to housing only. Fannie Mae’s formula is gross monthly income × 0.28 = maximum monthly PITI, where PITI means principal, interest, property taxes and homeowners insurance. In the consumer guide’s framing, the 28% figure is measured against gross income, meaning income before taxes and payroll deductions.
The 36% total-debt guideline
The 36% figure covers all recurring debt. According to the same guide, it includes the mortgage payment plus car loans, credit-card payments, and other loan payments. It excludes utilities. The guide measures this figure against net income, which is the basis the consumer rule uses. Lender DTI calculations, covered below, generally use a different income basis.
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How to run the screen
- Convert your annual gross income to monthly gross income by dividing by 12. Multiply that figure by 0.28. The result is a rough ceiling for the full monthly housing payment, including taxes and insurance.
- Add up your current recurring monthly debts: car loans, student loans, minimum credit-card payments, personal loans, and any child support or alimony you pay.
- Estimate your net monthly income (take-home pay). Multiply it by 0.36. Subtract your current debts from that figure. What remains is a rough ceiling for the mortgage payment under the 36% guideline.
- Compare the two ceilings. The lower number is the more conservative limit for a payment that is sustainable under this screen.
Why lenders do not use the same calculation
The consumer rule and lender underwriting use similar vocabulary but different mechanics. Fannie Mae’s Selling Guide (DTI page dated April 2, 2025) defines DTI as total monthly obligations divided by total monthly income of the borrowers whose income is used to qualify. The numerator includes the qualifying mortgage payment and other long-term and significant short-term debts. The table below sets the two methods side by side.
| Feature | 28/36 consumer guideline | Lender DTI calculation (Fannie Mae Selling Guide) |
|---|---|---|
| Housing measure | Maximum monthly PITI at 28% of gross monthly income | Qualifying housing payment, which may include PITIA (principal, interest, taxes, insurance and assessments) |
| Total debt measure | Mortgage plus car loans, credit cards and other loan payments, at 36% of net income | Total monthly obligations divided by total qualifying monthly income, generally gross |
| Obligations counted | Mortgage, car loans, credit-card debt, other loan payments; utilities excluded | Installment and mortgage debts, revolving debts, leases, certain alimony or child support, recurring monthly obligations, net rental losses; some small short-term debts can count if they significantly affect ability to pay |
| Items not counted as liabilities | Not specified in the consumer guide | Taxes, FICA, some retirement contributions, commuting costs, union dues and voluntary deductions are not treated as liabilities in this calculation |
| Status | General guideline, not a lending rule | Fannie Mae delivery and underwriting rule for loans it purchases |
The difference in income basis matters most. A DTI that uses gross income can look lower than a ratio built on net pay, which is one reason the two methods can point in different directions for the same household. Excluded items such as taxes and FICA still reduce what you can actually spend, so the lender’s figure does not replace your own budget.
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Where 36% is and is not a limit
The number 36% appears in two different places, and they carry different weight. The consumer rule uses it as a planning guideline. Fannie Mae’s Selling Guide also uses 36% as a ceiling, but only for certain loans. Neither one is a universal approval cutoff.
Manual underwriting
For loans underwritten manually under Fannie Mae’s guide, total DTI is generally capped at 36%. The ceiling can rise to 45% when the specified credit-score and reserve requirements are met. Exceptions and documentation requirements apply, so a borrower at 40% is not automatically ineligible, and a borrower at 36% is not automatically approved.
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- DEDICATED BUYER QUALIFYING KEYS: Enter client's income, debt and expenses to pre-qualify them to only show properties they can afford. Include tax, insurance and mortgage insurance then compare loan options and payment solutions to give your client choices before they make an offer to buy
- FIGURE OUT THE RIGHT LOAN: At the press of a button for jumbo, conventional, FHA/VA, or even 80:10:10 or 80:15:5 combo loans; check to see if ARMs or bi-weekly loans, quarterly payments or if interest-only payments are the answer; giving your client more choices; easily perform what if loan or tvm calculations Find loan amount, term, interest or PITI or PI payments
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Automated underwriting
For loan casefiles run through Fannie Mae’s Desktop Underwriter, the maximum allowable DTI is 50%. This is the most important reason 36% should not be read as a hard limit. Automated underwriting evaluates the whole file, including credit history, assets, and loan terms, rather than applying one ratio.
What federal rules require
The CFPB’s Regulation Z, at 12 CFR § 1026.43 (January 1, 2024 annual edition), requires creditors to consider DTI or residual income as part of the ability-to-repay assessment. It does not set a single DTI threshold that all creditors must apply. Creditors may also weigh factors such as assets and residual income. Individual lenders and loan programs therefore set their own limits within those requirements.
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- SPEAKS YOUR LANGUAGE: Keys clearly labeled in residential mortgage finance terms like Loan Amt, Int, Term, Pmt; this industry-standard calculator is super easy to use on all realty financing matters from finding a loan that works for your client to considering trust deeds investments, or finding remaining balances or balloon payments and more
- CONFIDENTLY AND EASILY SOLVE: Clients' financial questions whether they're buyers, sellers, investors or renters. Increase your perceived professionalism as a new agent, experienced broker or seasoned loan officer. Close more home sales and impress your clients with fast, accurate answers to all their real estate finance questions from PITI Payments to IRR, NPV and Cashflows
- DEDICATED BUYER QUALIFYING KEYS: Enter client's income, debt and expenses to pre-qualify them to only show properties they can afford. Include tax, insurance and mortgage insurance then compare loan options and payment solutions to give your client choices before they make an offer to buy
- FIGURE OUT THE RIGHT LOAN: For your client at the press of a button for jumbo, conventional, FHA/VA, or even 80:10:10 or 80:15:5 combo loans; check to see if ARMs or bi-weekly loans, quarterly payments or if interest-only payments are the answer; giving your client more choices; easily perform what if loan or TVM calculations find loan amount, term, interest or PITI or PI payments
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A worked example
The figures below are hypothetical and are used only to show how the two methods diverge.
- Income: $90,000 gross per year, or $7,500 per month. Take-home pay is $5,800 per month.
- 28% housing screen: $7,500 × 0.28 = $2,100 maximum monthly PITI.
- Existing debt: $400 car loan and $100 minimum credit-card payments, totaling $500 per month.
- 36% total-debt screen (net basis): $5,800 × 0.36 = $2,088 total monthly debt. Subtracting $500 leaves about $1,588 for the mortgage.
- Lender-style DTI (gross basis): a $2,100 housing payment plus $500 in other debt gives $2,600 in obligations. Divided by $7,500, that is about 34.7%, which falls under the 36% manual-underwriting ceiling.
In this example, the net-basis screen is the tighter constraint for the mortgage payment. The lender-style ratio is more permissive because it uses gross income. Neither figure shows whether the buyer can cover property tax variability, maintenance, or a larger down payment.
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Limits of the rule
- It ignores ownership costs beyond the payment. Down payment, closing costs, maintenance, utilities, and fees are outside both guidelines. Budget for them separately.
- It ignores your savings. Fannie Mae’s Selling Guide considers reserves when it decides whether a higher DTI can be accepted, but the consumer rule does not account for them.
- It assumes stable income. Variable pay, self-employment income, and recent job changes change the figures a lender uses and the risk you carry.
- It ignores local conditions. Property taxes, insurance premiums, and HOA dues vary widely by location and can push the PITI figure above 28% of gross income even when a loan is approvable.
Next steps after the screen
- Use an online affordability calculator to test a range of prices, rates, and down payments with real tax and insurance estimates for the area you are considering.
- Complete a homebuyer education course. Fannie Mae directs buyers to free courses as part of its homebuying resources.
- Ask a lender for prequalification. A lender reviews your actual income documents and debts and calculates DTI under the loan program you are considering. This is the only way to learn your approval figure for that loan.
Lender requirements change, and the figures above reflect the Fannie Mae pages and CFPB text cited, as of the dates given. Check the current Fannie Mae Selling Guide and the lender’s own guidelines before relying on any ceiling.
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