In short
No law sets one price you can afford. Lenders test two ratios: your housing payment against gross income, and all your monthly debts against gross income. In manual FHA underwriting (HUD Handbook 4000.1, revised August 12, 2026), the standard limits are 31/43, rising to 37/47 or 40/50 with compensating factors. Fannie Mae allows 36 percent, up to 45 percent, on manual loans and 50 percent through Desktop Underwriter.
The two ratios
The CFPB defines debt-to-income ratio (DTI) as “all your monthly debt payments divided by your gross monthly income,” meaning before taxes. It adds that “different loan products and lenders will have different DTI limits.”
- Housing ratio (FHA calls it PTI): your full monthly housing payment divided by gross income. FHA counts principal, interest, taxes, hazard insurance, flood insurance if required, mortgage insurance premium, association dues, ground rent, special assessments, payments on any secondary financing and other escrow payments.
- Total ratio (DTI): that housing payment plus car loans, student loans, credit card minimums and other monthly debts, divided by gross income.
So the price you can afford depends on more than the loan. Property tax, insurance and association dues are part of the test, and they differ by location. See debt-to-income ratio for how each debt is counted.
FHA limits (manual underwriting)
Section II.A.5.d.viii of Handbook 4000.1 sets the maximum payment-to-income and total debt ratios for manually underwritten FHA loans:
| Lowest decision credit score | Maximum ratios | Compensating factors required |
|---|---|---|
| 500 to 579, or no credit score | 31/43 | Not applicable; may not go higher |
| 580 and above | 31/43 | None |
| 580 and above | 37/47 | One: documented cash reserves, minimal increase in housing payment, or residual income |
| 580 and above | 40/40 | No discretionary debt |
| 580 and above | 40/50 | Two of: cash reserves, minimal payment increase, significant additional income not in effective income, residual income |
The Handbook allows “stretch” ratios of 33/45 for energy-efficient homes. Cash reserves count as a factor when they equal at least three monthly mortgage payments (one- and two-unit homes) or six (three- and four-unit homes). A minimal increase means the new payment is no more than $100 or 5 percent above your current housing payment, whichever is less, with a 12-month payment history. The Handbook has a separate section for loans scored by its TOTAL Mortgage Scorecard (Section II.A.4). See FHA loans.
Fannie Mae limits (Selling Guide B3-6-02)
The guide, last revised 04/02/2025 and part of the Selling Guide published October 7, 2026, sets one total DTI limit by method:
| Method | Maximum total DTI |
|---|---|
| Manually underwritten | 36% of stable monthly income; up to 45% if you meet the credit score and reserve requirements in the Eligibility Matrix |
| Run through Desktop Underwriter (DU) | 50% |
A recalculated ratio above 45 percent on a manual loan, or above 50 percent on a DU loan, is not eligible for delivery to Fannie Mae. See conventional loans.
About the “28 percent rule.” You will often read that housing should take 28 percent of gross income. That is a common rule of thumb, not a Fannie Mae rule: B3-6-02 sets total DTI limits and contains no 28 percent housing-ratio limit. FHA’s 31 percent is its own figure. Other lenders may add their own limits.
Example with assumed numbers
Suppose gross income of $8,000 a month and $600 of other monthly debts. The table shows the largest total housing payment each limit allows. These are ceilings, not advice on what to spend.
| Limit | Housing ratio cap | Total debt cap | Largest housing payment |
|---|---|---|---|
| FHA 31/43 | $2,480 | $3,440 - $600 = $2,840 | $2,480 |
| FHA 37/47 | $2,960 | $3,760 - $600 = $3,160 | $2,960 |
| FHA 40/50 | $3,200 | $4,000 - $600 = $3,400 | $3,200 |
| Fannie Mae 36% | none | $2,880 - $600 = $2,280 | $2,280 |
| Fannie Mae 45% | none | $3,600 - $600 = $3,000 | $3,000 |
| Fannie Mae 50% (DU) | none | $4,000 - $600 = $3,400 | $3,400 |
Take that housing payment, subtract taxes, insurance, mortgage insurance and association dues, and what remains pays principal and interest. The loan size follows from your interest rate. Use the home affordability calculator or the mortgage calculator to turn a payment into a price.
Passing the test is not the same as being comfortable
A ratio tells you what a lender may approve. It ignores groceries, utilities, childcare, savings and repairs. The CFPB advises: “Track your spending to know how much you can afford for a monthly payment,” and notes that the interest rate you expect helps you decide how much to spend. Add closing costs and cash for the down payment; see closing costs explained and down payment. A mortgage preapproval shows what a lender would offer.
Where states differ
The ratios are federal or investor rules and are the same everywhere. The payment they measure is not. Property tax, homeowners insurance and association dues vary by state and county, so the same income buys a different price in different places. Compare them in property tax by state, see the cost of buying a home in each state, or read the Texas property tax page for a high-tax example.
Frequently asked questions
What is the 28/36 rule?
It is a common guideline: housing under 28 percent and total debt under 36 percent of gross income. It is not a federal rule. Fannie Mae’s guide uses 36 percent as the manual-underwriting base, not as a hard cap, and has no 28 percent housing limit.
What DTI does FHA allow?
In manual underwriting, 31/43 with no extra factors, 37/47 with one compensating factor and 40/50 with two (580 credit score or higher). Below 580, or with no score, 31/43 is the limit.
Do lenders use gross or net income?
Gross. The CFPB defines DTI against gross monthly income, before taxes and deductions.
Does a bigger down payment raise what I can afford?
It lowers the loan and so the payment, which helps both ratios. It does not change the ratio limits.
Do property taxes count?
Yes. FHA includes real estate taxes, insurance and association dues in the housing payment, and Fannie Mae’s guide uses the full PITIA payment (principal, interest, taxes, insurance and association dues) for the home you are buying.
General information drawn from the official sources cited and dated on this page. It is not legal, tax or financial advice: for your own situation, ask a licensed professional.
More financing guides
- Mortgage Discount Points: How They Work and Tax Rules
- Adjustable-Rate Mortgage (ARM): Index, Margin and Caps
- 15-Year vs 30-Year Mortgage: Payment and Interest Compared
- Mortgage Rate Lock: Lock Periods, Float-Down and Expiry
- Jumbo Loans and 2026 Conforming Loan Limits
- Home Equity Loan vs HELOC: Key Differences
- Reverse Mortgage (HECM): Rules and Repayment
- Gift Funds for a Down Payment: Rules and Gift Letter
- Assumable Mortgages: FHA, VA and USDA Rules
- Mortgage preapproval: what lenders check, how long it lasts
- Conventional loans: requirements and 2026 limits
- FHA loans: requirements, 2026 limits and mortgage insurance
- VA loans: eligibility and funding fee
- USDA loans: eligible areas, income limits and fees
- How much down payment do you need to buy a home?
- Private mortgage insurance (PMI): how to remove it
- Credit score and mortgage rates: what lenders look at
- Debt-to-income ratio: the limits mortgage lenders use
- How mortgage rates are set: rate, APR, points and locks
- Escrow accounts for taxes and insurance: your rights
- Refinancing a mortgage: costs, break-even and your rights
- Loan Estimate: what it is and when you must get it
- Closing Disclosure: the 3-business-day rule and what to check
- Bridge loans: how they work and how lenders count them
- Down payment assistance programs: how they work
Sources
- FHA Single Family Housing Policy Handbook 4000.1, Section II.A.5.d.viii, last revised August 12, 2026 (U.S. Department of Housing and Urban Development) (consulted October 20, 2026)
- B3-6-02, Debt-to-Income Ratios (04/02/2025), Fannie Mae Selling Guide (consulted October 20, 2026)
- What is a debt-to-income ratio? (Consumer Financial Protection Bureau) (consulted October 20, 2026)
- Prepare to buy a home (Consumer Financial Protection Bureau) (consulted October 20, 2026)