What is the 28/36 rule for mortgages?

The 28/36 rule is a traditional guideline: spend no more than 28% of your gross monthly income on housing costs, and no more than 36% on total debt (housing + car payments + student loans + credit cards, etc.). It's a useful starting point, but your actual comfortable number may be lower.

What does a lender look at when deciding how much I can borrow?

Lenders primarily look at your debt-to-income ratio (DTI), credit score, employment history, and assets. Most conventional lenders allow a maximum DTI of 45–50%, but qualifying for the max doesn't mean you should borrow the max.

How much should I have saved before buying a home?

You need your down payment (3–20% of the purchase price depending on loan type), plus closing costs (roughly 2–5% of the loan amount), plus ideally 3–6 months of mortgage payments in reserve. First-time buyer programs can reduce how much you need upfront.

Is it better to put 20% down or use that money differently?

It depends. Putting 20% down eliminates PMI and lowers your monthly payment, but it also depletes your savings. In a rising market, buying sooner with less down (and paying PMI) can sometimes make more financial sense than waiting years to save 20%. This is worth running the math on with your loan officer.

How Much Home Can I Actually Afford? The Honest Answer | Aaron Jensen

When you get pre-approved for a mortgage, the letter says something like: “Congratulations, you qualify for up to $425,000.”

That number can feel exciting. It’s also often too high.

Lenders calculate the maximum you qualify for based on your income and debts. But they’re not running your actual monthly budget through their model — your Netflix subscription, your gym membership, your daycare costs, your weekend plans. That’s your job.

Here’s how to figure out what you can genuinely afford, not just what you’re approved to spend.

Start with your actual take-home pay

Lenders use your gross income (before taxes). You live on your net income (after taxes, 401k contributions, health insurance, everything else).

If you gross $7,500/month but take home $5,200, you should be doing your affordability math against $5,200.

Start there.

Apply the 28/36 rule — but treat it as a ceiling, not a target

The traditional guideline says:

28% of gross monthly income on housing (PITI: principal, interest, taxes, insurance)
36% of gross monthly income on all debt combined

On a $7,500 gross income, that’s a maximum housing payment of $2,100/month and total debt of $2,700/month.

These are widely-cited numbers, but they were developed in an era of lower housing costs, lower taxes in many markets, and before the era of student loans being a dominant financial burden for most buyers.

My advice: treat 28% as a ceiling, not a target. If you’re closer to 22–24% of gross income on housing, you’ll have a lot more financial breathing room.

The costs first-time buyers almost always underestimate

Your mortgage payment is not your total housing cost. Add these in before you commit to a number:

Property taxes: Vary wildly by location. In Baldwin County, Alabama, property taxes are relatively low — but they’re still real. Ask your lender or real estate agent for an estimate on any home you’re seriously considering.

Homeowner’s insurance: Budget $100–$200/month for a typical home in Alabama. Coastal or flood-prone areas run higher.

HOA dues: If you’re buying in a planned community or condo. Can range from $50 to $500+ per month and are often not included in your mortgage payment.

Maintenance: The old rule of thumb is 1% of the home’s value per year. On a $300,000 house, that’s $3,000/year — $250/month — for repairs, upkeep, and inevitable surprises. Older homes run higher.

Utilities: Ownership usually means a bigger space and higher bills.

When you add all of this up, the actual monthly cost of owning often runs $400–$800 higher than the mortgage payment alone.

Run the real number

Here’s the exercise I walk buyers through:

Write down your monthly take-home pay
List every fixed expense you have (car payments, loans, subscriptions, etc.)
Estimate your variable expenses (groceries, gas, dining, entertainment, etc.)
Identify what’s left over
Decide what portion of that you’re comfortable committing to housing

Whatever that number is — that’s your real budget. Work backward from there to a target home price, not forward from an approval letter.

What if you can’t afford what you want right now?

That’s genuinely okay, and worth saying plainly: not everyone should buy a home today. Sometimes renting makes more sense for your life stage and finances.

But if you want to close the gap, here are the levers:

Improve your credit score: Even a 20–30 point improvement can meaningfully lower your rate.
Pay down existing debt: Lowers your DTI and frees up cash flow.
Save more: For a larger down payment, which reduces your monthly payment and may eliminate PMI.
Consider a different area: In Baldwin County, for example, there’s a significant price difference between Gulf Shores and some inland areas — for very similar quality of life.
Look at loan programs: FHA, USDA, and first-time buyer assistance programs can significantly reduce what you need upfront.

If you’re not sure where you stand, that’s exactly what a pre-approval conversation is for. I’ll pull your credit, look at your income and debts, and give you an honest picture of where you are — not just the maximum you qualify for, but what actually makes sense for your situation.

Reach out any time — there’s no obligation and no pressure.

Start with your actual take-home pay

Apply the 28/36 rule — but treat it as a ceiling, not a target

The costs first-time buyers almost always underestimate

Run the real number

What if you can’t afford what you want right now?

Aaron Jensen

Ready to buy your home?