The rules of thumb we use
Rules of thumb are starting points, not approvals. Lenders and landlords use their own checks, and your budget may need more room, for example if you have high childcare costs.
| Rule of thumb | What it says | Where it comes from |
|---|---|---|
| 28/36 (house) | Mortgage costs up to 28% of gross monthly income; all debts up to 36%. | CFPB debt-to-income guide (suggests 28–35% for the mortgage and 36% or less in total) |
| 39/44 (Canada) | Housing costs up to 39% of gross income (GDS), all debts up to 44% (TDS), for CMHC-insured mortgages. | CMHC general requirements |
| 30% (rent) | Housing costs, including utilities, up to 30% of gross income. | HUD: defining housing affordability (HUD calls households paying more than 30% “cost-burdened”) |
| 20/4/10 (car) | At least 20% down, a loan of 4 years or less, and car costs up to 10% of gross monthly income. | A popular personal-finance rule of thumb, not an official standard. |
| Salary rule (college) | Borrow no more than your expected first-year salary, and keep loan payments to about 10% of gross pay. | A popular rule of thumb, not an official standard. |
Outside the US?
- UK: lenders check affordability using your income and outgoings. The Bank of England treats mortgages of 4.5 times income or more as “high loan to income”. Bank of England: high LTI lending · MoneyHelper mortgage affordability calculator
- Canada: choose the Canada option in the house calculator to use CMHC’s 39/44 limits and stress-test rate.
- Australia: Moneysmart home loan calculator
Frequently asked questions
What is a good rule for how much house I can afford?
The 28/36 rule: housing costs up to 28% of gross monthly income and all debts up to 36%. The CFPB suggests 28–35% for the mortgage and 36% or less for total debt.
How much rent should I pay?
A common guideline is no more than 30% of gross income, including utilities. HUD uses this 30% line to measure housing cost burden.
What is the 20/4/10 rule for cars?
At least 20% down, a loan of 4 years or less, and total car costs under 10% of gross monthly income. It’s a rule of thumb, not an official standard.
Are these calculators financial advice?
No. They are estimates based on rules of thumb, to help you plan. Lenders and landlords make their own decisions.