Is the 28% Rule Still Relevant for Homebuyers in 2025?

August 28, 2025•3 min read

What Is the 28% Rule?

For decades, financial experts have advised that your housing expenses should stay below 28% of your gross monthly income. Known as the “28% rule,” this guideline includes your mortgage payment, property taxes, homeowners insurance, and (if applicable) HOA dues.

It’s a simple formula: If you earn $100,000 a year, your monthly housing costs shouldn’t exceed $2,333.

But as home prices have surged and household budgets have become more complex, many buyers are starting to question whether the rule still holds up.

Where the 28% Rule Came From

The 28% rule has its roots in traditional underwriting guidelines from mortgage lenders. Historically, lenders used this ratio—alongside a total debt-to-income (DTI) limit of 36%—to assess whether a borrower could afford their mortgage.

These thresholds worked well in the 1980s and 1990s when housing was more affordable relative to income, and consumer debt levels were generally lower.

Fast forward to 2025, and the financial landscape has changed dramatically.

Why the Rule Feels Outdated

Let’s face it: in many parts of the country, housing has simply outpaced wages. According to recent housing data, the national median home price remains near $430,000, and in high-cost urban areas, entry-level homes often start well above $600,000.

Trying to stay under 28% in these markets often means one of two things:

Settling for a much smaller home than you need, or
Commuting long distances from more affordable areas

Neither of those options works for everyone—especially families, remote workers seeking space, or individuals without flexible work schedules.

At the same time, younger buyers are carrying heavier student loan debt, facing higher child care costs, and spending more on essentials like healthcare and transportation.

Should You Ignore the Rule Entirely?

Not quite. The 28% rule is still a useful starting point—but it shouldn’t be treated as a hard limit for everyone.

Instead, think of it as a financial check-in. Ask yourself:

Can I comfortably afford this payment alongside my other monthly expenses?
Will I still be able to contribute to retirement, build an emergency fund, and cover life’s unexpected costs?
Am I stretching so thin that a job change, car repair, or medical bill could throw everything off?

These questions are more important than hitting a specific percentage.

When It’s Okay to Go Above 28%

In many cases, going above the 28% guideline makes sense—especially if:

You have little to no other debt (credit cards, student loans, car payments)
You have strong savings and a stable income
You plan to stay in the home long-term and build equity

Lenders today often approve loans with housing costs up to 35%–40% of gross income, depending on your full financial profile. If you’re responsible with money and understand your budget, a higher ratio may be totally manageable.

Final Thoughts

Affordability isn’t about following a dated formula—it’s about understanding your numbers and lifestyle.

The 28% rule can still be a helpful benchmark, but it doesn’t reflect the reality of today’s housing market or your personal goals. What matters more is building a budget that accounts for your income, spending habits, savings goals, and the life you want to live.

So instead of asking, “Can I stay under 28%?”—try asking, “Can I afford this mortgage and still live the life I want?”

The answer to that will give you a much clearer picture of what “affordable” really means.

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