Short answer
A common ceiling is 28% of gross monthly income for the housing payment and 36% for all debt payments. That is the 28/36 rule, not a lender's maximum. Lenders may approve you for more — that's their risk tolerance, not your budget. Include property taxes, insurance, HOA, and a maintenance reserve in the payment, and keep 3–6 months of expenses in cash after closing.
The two ceilings, at a glance
$120,000 income with $600/month in other debts.
The lower ceiling wins. Here the 28% binds — if your other debts were heavier, the 36% side could bind instead.
The decision
You're setting the maximum monthly housing payment that leaves your savings plan intact — not the maximum the bank will lend you. Those are different numbers, and the bank's is almost always higher.
Two ceilings apply at once: the housing ceiling (28% of gross monthly income for PITI + HOA) and the total-debt ceiling (36% for all debt payments). Your budget is the lower of the two.
The simple rule — a rule of thumb, not a law
Rule of thumb: the 28/36 rule. Keep the full housing payment — principal, interest, taxes, insurance, and HOA — at or under 28% of gross monthly income, and all monthly debt payments at or under 36%. It's a ceiling, not a target: comfortable is usually below it.
Worked example
$120,000 gross income = $10,000/month, with $600/month in car and student loans:
28% ceiling · binds ✓
$2,800/mo
The housing payment — PITI + HOA — stops here.
Debt-side room
$3,000/mo
$3,600 total-debt ceiling minus $600 in other debts. Higher — so it doesn't bind.
Illustrative math, not personalized advice. Your numbers will differ.
What changes the answer?
Other debts
If your non-housing debts are heavy, the 36% side can bind instead of the 28%. Paying down a car loan can raise your housing budget more than a raise does.
Property taxes
A $500,000 house in New Jersey and Texas carry wildly different tax loads — same price, different payment.
HOA dues
Count the full HOA in the 28%. A $400 HOA is $400 of housing payment, whatever the listing emphasizes.
Maintenance reserve
~1% of the home's value per year belongs in your mental payment, even though the 28/36 rule doesn't count it.
Income stability
Variable or commission income? Budget off a conservative base, not your best year.
Watch out for
- Buying at the pre-approval max. That's the bank's risk limit, not your budget.
- Forgetting maintenance and repairs. The 28% covers PITI + HOA — the roof is extra.
- Draining the emergency fund for the down payment. House-poor with no cash buffer is how small problems become foreclosures.
- Counting on future raises. Buy what today's income supports; raises are for saving.
Run the numbers
Run the 30-second check with your own numbers:
A planning check, not a lender's maximum — and not advice. The 28/36 rule is a common ceiling, not a universal affordability rule.
What should you look at next?
Related questions
Last updated September 2026. General education for U.S. earners age 25–40 — not tax, legal, or investment advice.