Is the 28 % Rule Still Valid for Homebuyers?
When planning to buy a home, many people turn to simple “rules of thumb” to guide them. One of the most popular is the 28 % rule: your monthly housing costs (mortgage, taxes, insurance, etc.) should not exceed 28 % of your gross (pre-tax) monthly income.
Over time, that rule was extended into the the 28/36 rule:
Keep housing costs under 28 % of gross income
Keep all debt obligations (including housing) under 36 %
This framework has helped generations of buyers stay within financially safe limits. But in today’s market — with high home prices, rising taxes, insurance, and interest rates — is the 28 % rule still useful? Let’s dig in.
Why the 28 % Rule Became Popular
It’s simple and easy to remember.
It balances having a "big enough" home without overextending financially.
It gives lenders a benchmark to assess affordability and manage risk.
It helps prevent becoming “house-rich but cash-poor,” where homeowners struggle with non-mortgage expenses.
Over the years, many lenders used guidelines like 28/36 when underwriting mortgages, though with variations and exceptions.
What Has Changed: Why It’s Harder to Stick to 28 %
Several market pressures make the 28 % target tougher to hit today:
Higher home prices. Median prices have surged in many markets, pushing buyer budgets upward.
Rising interest rates. Even a small bump in rates increases payments significantly, making housing costs a larger share of income.
Increased taxes and insurance. Property taxes and homeowners insurance have climbed, adding to monthly housing expenses.
Other debts and expenses. Student loans, car payments, medical costs, and lifestyle spending reduce flexibility.
Because of these, many buyers find staying under 28 % feels unrealistic — especially in competitive or high-cost areas. Some buyers and experts informally use more lenient ratios like 30–35 %.
Still, that doesn’t mean the 28 % rule is useless — rather, it needs context.
How the 28 % Rule Still Adds Value
Even if it’s harder to hit exactly 28 %, the rule continues to serve as a benchmark for financial safety. Here’s how:
It gives you a warning flag if your projected housing costs are significantly over 28 %.
It builds in cushion for unexpected expenses, future tax or insurance increases, or periods of lower income.
It pairs well with the back-end debt ratio to keep all debt obligations under control.
It encourages conservative planning by forcing trade-offs — smaller home, larger down payment, lower-cost location, etc.
In many cases, if your numbers are slightly above 28 %, lenders may still approve your loan if you have strong credit, reserves, or other compensating factors.
What to Use Instead (or Alongside) the 28 % Rule
Because one size rarely fits all, here are a few ways to modernize your affordability guideline:
Use flexible percentages: Some financial advisors now lean toward 30–35 % for housing in today’s markets.
Emphasize debt-to-income (DTI): Keep all debts (housing + other obligations) within a threshold (often 36–43 % depending on loan type and credit profile).
Stress test your budget: Run scenarios — if insurance or taxes go up 10 %, or your income dips, can you still manage?
Leave breathing room: Reserve a margin for savings, emergencies, maintenance, and lifestyle costs.
Work with a mortgage advisor: They can run real scenarios, consider your credit, reserves, and market variables — not just simple rules of thumb.
Bottom Line
Yes, the 28 % rule still has value — but it’s not a perfect, hard-and-fast law. In today’s real estate and interest rate climate, it’s often more of a guideline or benchmark rather than a strict limit.
If you find yourself above 28 %, that doesn’t automatically mean a home doesn’t make sense — but it does call for careful analysis, conservative planning, and stress testing.
If you want help running your own numbers (housing cost vs. income vs. debt), a mortgage advisor can help you check whether a home purchase is financially safe for you — not just by a universal rule.
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