28/36 RULE
Rule of thumb used for computing the amount of debt an individual or household can obtain. It stipulates a household can spend up to 28% of its gross monthly income on total housing costs and no greater than 36% on total debt service, including housing and other types of debt. Mortgage lenders and other creditors use the 28/36 rule to determine one’s borrowing capacity, with a premise that any loan exceeding the 28/36 yardstick may be difficult for the individual or household to settle the debt, which may result to default.
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