If your monthly expenses total more than that, you might need to reconsider how much house you can afford. This equals $1,800, which after subtracting the $1,400 mortgage and housing costs, leaves just $400 in the budget for debt repayments. These expenses include your property taxes, insurance payments and any homeowners association or condo fees.Īs for your debts, meeting the requirements of the mortgage rule would mean that the total of your recurring payments can be no more than 36 percent of your $5,000 in income. According to the rule, you’ll be able to budget up to 28 percent of that – or $1,400 – for your monthly mortgage payment and housing expenses. Let’s say that you bring home $5,000 every month. To figure out if you qualify for a mortgage under the 28/36 rule, you’ll need to start with your income. Some lenders may relax the requirements for those with high credit scores, but you can’t count on that happening. Anyone who doesn’t fall within the parameters of the rule is thought to be more likely to default on a loan. The idea behind the 28/36 mortgage rule is that it can be used to determine an applicant’s financial health and how much debt they can safely take on.
Lenders will consider your credit score, income, debt-to-income ratio and a host of other factors in determining whether to approve your mortgage application.
How the 28/36 Rule Affects Mortgage Approval Here’s what you need to know if you’re in need of financing to buy a home. Lenders look to the 28/36 rule when assessing whether or not a borrower has the ability to afford a mortgage. In addition, no more than 36 percent of what you make should go toward debts. How much house can you afford to buy? The answer may be found by examining the 28/36 mortgage rule.Īccording to the rule, you should spend no more than 28 percent of your gross monthly income on housing costs.
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