How Much House Can I Afford in 2026? The 28/36 Rule, DTI, and the Real Numbers

The number lenders use: the 28/36 rule

The 28/36 rule is the affordability framework banks have used for decades. It has two parts:

• Front-end ratio (28%): Your monthly housing cost should be no more than 28% of your gross monthly income.
• Back-end ratio (36%): Your total monthly debt payments - housing plus all other debt (car loan, student loan, minimum credit-card payments, personal loans) - should be no more than 36% of your gross monthly income.

"Gross" means before tax. "Housing cost" doesn't mean just the mortgage - it means PITI (more on that below).

Worked example

Take a household earning $8,000/month gross ($96,000/year before tax):

• 28% front-end limit: $2,240/month for housing.
• 36% back-end limit: $2,880/month for all debt combined.

If this household already pays $400/month in student loans and $300/month on a car loan, they have $700/month of non-housing debt. That leaves $2,180/month for housing ($2,880 − $700) - which is slightly below the 28% front-end limit, so the back-end ratio is the binding constraint.

A lot of people fail this check because the back-end ratio reveals that other debt eats your mortgage budget. Pay down a credit card before applying and your borrowing capacity can jump noticeably.

What PITI actually means

PITI is the four-letter acronym every buyer should memorise. It's the real monthly cost of owning a home, not just the mortgage payment.

• P - Principal (the part of the payment that pays down what you owe)
• I - Interest (the part that pays the lender)
• T - Property tax (varies wildly by state, city, and country - in the US, typically 0.5%-2.5% of property value annually)
• I - Insurance (homeowner's insurance, plus PMI/LMI if your deposit is under 20%)

A $2,000/month "mortgage payment" quote often hides another $500-$800/month in T and I. When you plug numbers into our loan calculator, you're getting P+I. Add the T and I from your area to get the figure that actually has to fit the 28% rule.

The four numbers you need

Before you can answer "how much house," collect these:

1. Gross monthly income (yours plus any co-borrower's, before tax)
2. Total non-housing monthly debt (minimum payments on every loan and card)
3. Available cash for deposit + closing costs (deposit + ~3-5% of price for closing in the US, more in the UK if you trigger Stamp Duty)
4. Realistic mortgage rate for your credit profile - check current 30-year fixed rates for the US, 5-year fixed for the UK/Canada, or 1-year variable for Australia

With those four numbers, the affordability question becomes a math problem you can solve in under a minute.

The 2026 reality check: rates, prices, and what's changed

Three things matter about the 2026 housing market that shift the numbers from a generic "28/36" calculation:

1. Mortgage rates are still higher than the 2020-2021 era

Even with central banks cutting in 2025-2026, a typical US 30-year fixed mortgage in mid-2026 sits well above the 3% range some buyers anchored to during the pandemic. Every 1% higher rate cuts what you can afford by roughly 10-12% at the same monthly payment.

A $400,000 loan at 4% costs ~$1,910/month (P+I). The same monthly budget at 7% buys only ~$287,000 of mortgage.

2. Property tax and insurance are rising faster than mortgage rates

In a lot of US markets, property tax and home insurance have outpaced inflation since 2022. Run today's actual T and I figures from your county assessor and a real insurance quote - don't use 2020 numbers.

3. The 36% back-end limit catches more buyers in 2026

Student loan payments resumed in late 2023 and remain a significant line item for many borrowers. If you've added a car loan during high-rate years, that monthly figure is bigger than it would have been five years ago. Both push your back-end ratio up and your affordable mortgage down.

A more honest framework: the 25% net rule

Many financial planners use a stricter rule than the bank does: housing cost no more than 25% of your take-home (net) pay.

The 28% rule is gross income. The 25% net rule is take-home pay after tax. For a US household in the 22% federal bracket plus state tax, 28% of gross is roughly 36-40% of net - which can feel tight in practice.

If you want financial breathing room (the kind that lets you save for retirement, handle an unexpected expense, or take a job pivot), aim for 25% of net pay on PITI rather than the bank's maximum.

How to stress-test your number before signing

Once you have a target purchase price, run three stress tests before you make the offer:

1. Rate-up test: Re-run the loan calculator with the rate 1 percentage point higher. If a remortgage in 5 years pushes you over the 36% line, you're borrowing at your ceiling.
2. Income-down test: Could one earner cover the PITI alone if the other lost their job for 6 months? If not, build a bigger emergency fund before buying.
3. Maintenance test: Add 1% of the home's value per year for maintenance to your annual budget. That's $4,000 on a $400,000 home, or about $333/month. Does the budget still work?

If you fail all three tests, you can still buy the home - but you're stretching, and "stretching" is what turned the 2008 housing market into a crisis.

Should I buy at the top of my budget?

Almost always no. Here's why:

• Houses cost more than mortgages. Furnishing, immediate repairs, council tax/property tax, gardening, and the inevitable broken boiler all hit hardest in year one.
• Your future self is not paid more. Many buyers tell themselves "I'll grow into the payment." Some do. Many find that life stages add costs (childcare, parental support, health) faster than salary grows.
• Selling is expensive. Estate agent fees, conveyancing, stamp duty on the next place. If buying at the top forces you to sell within 3 years, you'll lose money.

The buyers who report being happiest with their purchase 5 years later are the ones who bought at 80-85% of what the bank would have lent them.

Country-specific notes

United States

• 30-year fixed is the default. Compare to a 15-year fixed - the rate is lower and you build equity faster, but the payment is much higher.
• Conforming loan limits change annually; in high-cost areas a "jumbo" loan has stricter requirements.
• Property tax varies from ~0.3% (Hawaii) to ~2.5% (New Jersey) of property value annually.

United Kingdom

• Standard mortgage terms are 25 years; 30-35 year terms are common for first-time buyers to improve affordability.
• Don't forget Stamp Duty Land Tax - on a £400,000 home it's £7,500 for a non-first-time buyer in 2026. See our UK Stamp Duty guide.
• The FCA's affordability stress test requires lenders to check that you'd still afford payments at significantly higher rates - check your decision-in-principle figure against your own number.

Australia

• LMI (Lenders Mortgage Insurance) applies below a 20% deposit and can add tens of thousands to the cost.
• Stamp duty varies dramatically by state - it can be 4-6% of the purchase price.
• Variable-rate loans dominate; budget for rate movements.

Canada

• Standard amortisation is up to 25 years; the mortgage stress test requires you to qualify at a higher rate than your contract rate.
• CMHC insurance is mandatory below a 20% deposit.

Frequently Asked Questions

What's the difference between pre-qualification and pre-approval?

Pre-qualification is a quick estimate based on numbers you tell the lender, with no document check. Pre-approval involves the lender actually verifying your income, debts, and credit. Sellers and estate agents take pre-approval seriously; pre-qualification is closer to a guess. Always get pre-approved before making serious offers.

Should I put down more than 20%?

Above 20% you avoid mortgage insurance (PMI in the US, LMI in Australia, CMHC in Canada). Going much higher than 20% reduces your monthly payment further but ties up cash that could be invested or kept as emergency funds. There's a real trade-off - bigger deposit means smaller, safer mortgage, but less liquidity. Most planners suggest 20% is the sweet spot unless you're risk-averse and have surplus cash.

Does my credit score really change my affordability that much?

Yes. A 760+ credit score in the US typically qualifies for the lowest advertised rate. A 680 score on the same loan can pay 0.5-1.5 percentage points more - on a 30-year mortgage that's tens of thousands in extra interest. Spending six months pushing your score above 760 before applying often pays off more than any other single move.

What if I'm self-employed?

Lenders usually want to see two years of tax returns and apply more conservative income calculations. Plan for a stricter back-end ratio, a slightly higher rate, and a longer underwriting process. Some lenders specialise in self-employed mortgages and may be more flexible.

Is the 28/36 rule strict or just a guideline?

It's a guideline. Many lenders will approve you above 36% back-end if you have a strong credit score, large deposit, or significant assets. Approval and affordability are different things - just because a bank will lend you the money does not mean the payment will be comfortable.

Try the numbers yourself

Plug your own figures into the calculator at the top of this page, then use our rent vs buy calculator to check whether buying actually beats renting once you account for opportunity cost on your deposit. If the buy case only works at the top of your budget, that's the calculator telling you to consider waiting or renting longer.

Check the math. Protect your margin. Plan your money.