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28/36 Rule
Definition
A lending guideline: housing costs ≤ 28% of income, total debt ≤ 36%.
Explanation
The 28/36 rule is a standard underwriting guideline. The 28% front-end ratio means housing payment (PITI) shouldn't exceed 28% of gross income. The 36% back-end ratio means all debt including mortgage shouldn't exceed 36%.
While not a hard requirement, exceeding these thresholds makes qualifying harder and may result in higher rates.
Example
$7,000 income: max housing at 28% = $1,960/month. Max total debt at 36% = $2,520/month.