How Much Of Your Income Should Go To Your Mortgage? (2024)

FAQs

How Much Of Your Income Should Go To Your Mortgage? ›

Key takeaways. The traditional rule of thumb is that no more than 28 percent of your monthly gross income or 25 percent of your net income should go to your mortgage payment.

Spending 40% of your total income on your mortgage is probably too much — most mortgage lenders will either not approve your application or charge you a very high interest rate.

It's generally advisable to keep your housing costs to 30% of your income or less. Spending 50% of your income on housing could cause you to fall behind on mortgage payments or other bills.

What Percentage Of Your Income Should Go To Your Mortgage? To determine how much income should be put toward a monthly mortgage payment, there are several rules and formulas you can use. The most popular is the 28% rule, which states that no more than 28% of your gross monthly income should be spent on housing costs.

The 28% mortgage rule states that you should spend 28% or less of your monthly gross income on your mortgage payment (e.g., principal, interest, taxes and insurance).

With a $70,000 annual salary and using a 50% DTI, your home buying budget could potentially afford a house priced between $180,000 to $280,000, depending on your financial situation, credit score, and current market conditions. This range is higher than what you might qualify for with more traditional DTI limits.

The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.

An individual earning $60,000 a year may buy a home worth ranging from $180,000 to over $300,000. That's because your wage isn't the only factor that affects your house purchase budget. Your credit score, existing debts, mortgage rates, and a variety of other considerations must all be taken into account.

On a $90,000 salary, you could potentially afford a house worth between $280,000 to $320,000, depending on your specific financial situation. This range assumes you have a good credit score and manageable existing debts.

The 28% of your income rule

If you earn $50,000 per year, you earn about $4,166.67 per month. At 28% of your income, your mortgage payment should be no more than $1,166.67 per month. Considering a 20% down payment, a 6.89% mortgage rate and a 30-year term, that's about what you can expect to pay on a $185,900 home.

How much house for $3,500 a month? ›

A $3,500 per month mortgage in the United States, based on our calculations, will put you in an above-average price range in many cities, or let you at least get a foot in the door in high cost of living areas. That price point is $550,000.

With an $80,000 annual salary, you could potentially afford a house priced between $240,000 and $320,000, depending on your financial situation, credit score, and current market conditions. However, this is a broad range; your specific circ*mstances will determine where you fall.

While your income is a solid starting point, lenders also scrutinize your debt-to-income ratio, credit score, and other financial obligations. With a $100k salary in today's market, you could qualify for a mortgage between $250,000 and $350,000.

That's the biggest takeaway from a LendingTree study released this week that found that 18.3 million homeowners are what the housing industry calls cost-burdened, or "house poor." That refers to homeowners who pay more than 30% of their monthly income on housing, including the mortgage, utilities and other costs.

Key takeaways. The traditional rule of thumb is that no more than 28 percent of your monthly gross income or 25 percent of your net income should go to your mortgage payment.

The 28%/36% Rule

According to this rule, a maximum of 28% of one's gross monthly income should be spent on housing expenses and no more than 36% on total debt service (including housing and other debt such as car loans and credit cards).

Banks may approve mortgage payments of up to 35% of your pretax income. But some experts advise limiting payments to no more than 25% of your after-tax income. Here's why it matters.

The 40% rule suggests that all of your loans, including house mortgage, student loan, car insurance, and credit card payments, shouldn't exceed 40% of your monthly income.

On a $40,000 salary, you could potentially afford a house worth between $100,000 to $140,000, depending on your specific financial situation and local market conditions. While this may limit your options in many urban areas, there are still markets where homeownership is achievable at this income level.