Phil Aitken
Phil Aitken
Owner/Broker

What’s the 28% Rule?

When it comes to purchasing a home, one of the most important considerations is understanding how much you can comfortably afford. This is where the 28% rule, also known as the front-end ratio, comes into play. If you’re a homebuyer in Jacksonville, Florida, this rule can be a valuable guideline in determining the maximum mortgage you can realistically take on based on your income.

In this blog post, Phil Aitken and the real estate experts at Your Home Sold Guaranteed Realty - Phil Aitken Home Team discuss the 28% rule as it applies to buying a home in Jacksonville.

Key Takeaways:

  • The 28% rule suggests that your total monthly housing costs should not exceed 28% of your gross monthly income.
  • This rule helps lenders assess your ability to manage your mortgage payments and avoid becoming “house poor.”
  • In Jacksonville, Florida, where the median home sale price is around $390,000, following the 28% rule can help you determine an appropriate price range for your home purchase.
  • While the 28% rule is a guideline, lenders may consider additional factors when evaluating your mortgage application.

The 28% rule is part of the broader 28/36 rule used by lenders to assess a borrower’s ability to manage their monthly mortgage payments and other debts. According to this rule, your total monthly housing costs, including mortgage payments (principal and interest), property taxes, homeowners insurance, and other housing-related expenses, should not exceed 28% of your gross monthly income.

What Does the 28% Rule Entail?

1. Monthly Housing Costs: This includes your monthly mortgage payment (principal and interest), property taxes, homeowners insurance, and any other housing-related expenses such as homeowners association fees or private mortgage insurance (PMI).

2. Gross Monthly Income: This is your total monthly income before taxes and other deductions. Lenders typically consider your gross income when evaluating your mortgage eligibility.

3. 28% Threshold: Your total monthly housing costs should not exceed 28% of your gross monthly income. For example, if your gross monthly income is $5,000, your housing costs should not exceed $1,400 (28% of $5,000).

Why Do Lenders Use the 28% Rule?

By adhering to the 28% rule, lenders aim to ensure that you have a manageable level of housing expenses in relation to your income. Exceeding this threshold may signal that you are overextending yourself financially and may struggle to keep up with your mortgage payments and other financial obligations.

It’s important to note that the 28% rule is just a guideline, and lenders may consider additional factors such as your credit score, debt-to-income ratio, and overall financial situation when evaluating your mortgage application.

In the Jacksonville, Florida housing market, where the median home sale price is around $390,000, following the 28% rule can help you determine an appropriate price range for your home purchase. For instance, if your gross monthly income is $6,000, your maximum monthly housing costs should not exceed $1,680 (28% of $6,000), which could translate to a mortgage amount within the median home value range depending on the interest rate and other factors.

How Much Can You Afford in Your Next Jacksonville Home?

Before you start your home search in Jacksonville, it’s essential to get pre-approved for a mortgage. This process involves providing your lender with detailed financial information, including your income, assets, and credit history. Once pre-approved, you’ll receive a pre-approval letter stating the maximum loan amount you qualify for. This gives you a clear understanding of your home buying budget in the Jacksonville market.

Your Home Sold Guaranteed Realty - Phil Aitken Home Team. What's the 28% Rule?
Phil Aitken

Call Jacksonville, Florida Real Estate Expert Phil Aitken

If you’re a homebuyer in Jacksonville, Florida, and need guidance in understanding how much house you can afford, consider reaching out to local real estate expert Phil Aitken. With their expertise and knowledge of the local market, they can help you navigate the home-buying process and ensure you make an informed decision that aligns with your financial goals and the 28% rule.

Phil Aitken, Owner/Broker
Phil Aitken is the Owner/Broker with Your Home Sold Guaranteed Realty - Phil Aitken Home Team and has over 13 years of Real Estate experience. Phil’s faith and desire for his family’s continued security fuel his business growth and leadership. The Phil Aitken Home Team continues to profoundly impact the people of Jacksonville via supporting several faith-based organizations. Phil gives back a portion of every real estate transaction to The Tim Tebow Foundation and Rethreaded. Find Phil's full story here.