Using the 28/36 Rule to Budget for Buying a House

For most people, the first step in the homebuying process is determining how much home you can afford.

If you’re taking out a mortgage, one way to calculate how much debt you should take on is by using the 28/36 rule.

The 28/36 rule advises you to spend no more than 28% of your pre-tax income on your housing payment, and no more than 36% of your income on total debt (including mortgages, auto loan payments and credit card debt).

Let’s say you and your partner make a combined income of $10,000 per month. Using the 28/36 rule, your maximum mortgage payment would be $2,800. So, if you decide to take out a mortgage that costs you $2,800 per month (28%), the rest of your debt should add up to no more than an additional $800, for a total of $3,600 in monthly debt obligations.

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