28/36 Rule Calculator
The 28/36 rule is a guideline commonly used by lenders to determine how much an individual can comfortably afford to borrow for a mortgage. It divides a person’s debt-to-income (DTI) ratio into two parts:
- 28% Front-End Ratio: No more than 28% of your gross monthly income should go toward housing costs (mortgage payments, property taxes, and insurance).
- 36% Back-End Ratio: No more than 36% of your gross monthly income should go toward total debt obligations (including housing costs, credit card payments, student loans, car loans, etc.).
Here’s a table summarizing the 28/36 rule:
| Aspect | Details |
|---|---|
| Front-End Ratio (28%) | The portion of gross monthly income allocated to housing expenses only. |
| Housing Expenses Include | Mortgage principal, interest, property taxes, homeowners insurance. |
| Recommended Limit | Housing expenses should not exceed 28% of gross monthly income. |
| Back-End Ratio (36%) | The portion of gross monthly income allocated to all debt obligations. |
| Total Debt Includes | Housing expenses + other debts (credit cards, student loans, car loans). |
| Recommended Limit | Total debt payments should not exceed 36% of gross monthly income. |
Example
If your gross monthly income is $5,000:
- 28% Front-End Limit: Your housing costs should not exceed $1,400.
- 36% Back-End Limit: Your total monthly debt payments should not exceed $1,800.
This rule helps ensure that borrowers are not taking on more debt than they can manage, minimizing the risk of default.