Can You ACTUALLY Afford That House? 28 - 36 Rule Explained 🏡

Can you really afford that house? In this video from January 2025, I talked about how to buy without becoming house poor, and I explained what the 28/36 rule is.

In the mortgage world we use something called debt-to-income ratios, and there are two. There is the front-end ratio and the back-end ratio. The back-end ratio includes all of your monthly debts plus the housing expense, which would be the mortgage payment you want to qualify for. In a perfect world, your ratios stay at 28% or less on the front end and 36% or less on the back end. Put another way, your total monthly obligations including a mortgage are no more than 36% of your total monthly income.

Here is the thing. Most mortgage lenders will tell you those ratios can go much higher, and they can. I want to ask you a few questions to help you decide whether you should.

The first is affordability. One of the biggest issues we face is that the median home price in the United States is much higher than it was when these ratios were created. There are people in my industry who say rates are 6% or 7%, but they remember when they were 18% back in the early 1980s. That math does not really work. If you look at how much average wages have gone up since then compared to the interest rate and price of a home today, it does not line up. Simply put, it is much more expensive to buy a home today no matter how you look at it.

So for the average person looking to buy, your ratios may be higher than these, maybe a lot higher. That is something for you and your mortgage lender to determine. Most people do not want to end up house poor. But if you look at cost-of-living adjustments in your income, maybe your spouse's income, and you have some consumer debt that will be paid off in the next one to five years, there may be exceptions where going higher than the ratios makes sense for you.

I hate to say it, but if you are over these ratios and working with a mortgage lender, ask them this: do you think it is wise for me to go up to a higher debt-to-income ratio, or is there a better option? Any good mortgage lender is going to be interested in your family's long-term wealth creation. They do not just want to close a loan for you. They want to put you in a great position. I will tell you that most of the clients I work with today are people I worked with 10 or 15 years ago. So you want to ask the hard questions, because unfortunately some lenders will take your information and offer a loan and never have this conversation.

If you want a straight answer on where your ratios land, start with first-time buyer options or get your rate. I would love to hear your questions. MortgageOne is now licensed in 49 states.