What the 28% Rule Actually Says

The traditional rule of thumb: your total monthly housing payment — principal, interest, property taxes, and insurance (PITI) — should not exceed 28% of your gross monthly income. Add other debts (car loans, student loans, credit card minimums) and the total should stay under 36% of gross income. Together they're called the front-end and back-end ratios.

Front-End vs. Back-End in Practice

A household earning $10,000/month gross could afford up to $2,800/month in PITI under the 28% rule. That's the front-end.

If that same household has a $500 car payment and $200 in minimum credit card payments, the back-end ratio caps total debt service at $3,600. So housing is effectively capped at $2,900 — close to the front-end limit, with no slack.

Lenders today will often stretch these ratios — DTIs up to 45% on Conventional, 50% on FHA — but stretching them means a tighter budget every month.

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The Real Question

Lenders ask "what's the maximum we'll lend?" — you should be asking "what payment lets me still live my life?" Those are different numbers.

Why Florida Numbers Are Different

The classic 28% rule assumes property taxes around 1% and homeowner's insurance around 0.35% of home value. Florida often blows both numbers up:

  • Property taxes in Miami-Dade, Broward, and Palm Beach often run 1.1–1.3% on a non-homesteaded property.
  • Insurance on coastal homes can be 1.0–2.0% of home value — sometimes more for older homes or properties in evacuation zones.
  • HOA fees on condos can add $400–$1,500/month and don't count in PITI but absolutely count in your real budget.

So a $400,000 home in inland Central Florida might cost $2,400/month all-in. The same $400,000 condo in Miami Beach might cost $3,800/month after HOA, insurance, and special assessments.

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Florida Tax + Insurance Reality

On a $400K Florida home, taxes + insurance can easily run $1,000+/month — turning what looks like an affordable P&I payment into a tight budget.

How to Calculate Your Number

Quick math: take your gross monthly income, multiply by 0.28. That's your safe maximum PITI. Now subtract realistic Florida estimates for taxes and insurance to find your principal + interest budget. Plug that into a mortgage calculator at today's rates to back into a home price.

Example: $9,000 gross monthly income × 0.28 = $2,520 PITI ceiling. Subtract $400 taxes + $300 insurance = $1,820 for P&I. At 7% interest on a 30-year loan, that supports a loan of roughly $274,000 — a home around $342,000 with 20% down.

28%
Front-end ratio
36%
Back-end ratio
45–50%
Lender max DTI
6 mo
Recommended reserves

When It's Okay to Stretch the Rule

  • Strong income trajectory: Early-career professionals whose income will grow can responsibly carry a higher ratio for a few years.
  • No other debt: If your back-end ratio is well under 36%, more room exists at the front.
  • Large emergency fund: 6+ months of full payments saved means you can absorb job loss.

When NOT to stretch: irregular income, planned family changes, or a market where appreciation is uncertain.

Run real numbers for your income and target price.

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