When you buy a home, think carefully about whether you can reasonably concentrate on your mortgage payments. Understanding this means living comfortably andThe poor family” – We have a hard time to be rewarded and meet every month.
But how do you know how much you will spend on a mortgage? Below are a few different rules that can be applied:
What percentage of your income should you go to your mortgage?
The situation with the borrower is all different and no one may fit you perfectly. But here we present some of the schools of thought about which percentage of income should be paid for a mortgage.
28% rule
“The 28% rule is a traditional mortgage lending guidelines that allow home buyers’ monthly mortgage payments to not exceed 28% of their monthly total income. This includes Principal, interest, taxes, insurancesays Reed Letson, owner of Elevation Mortgage in Colorado Springs, Colorado.
This 28% cap is based on the borrower’s frontend Debt and Income (DTI) Ratioor monthly mortgage payments compared to their income.
“This is based on decades of lending data showing that borrowers who maintain housing costs below this threshold are likely to manage their mortgage payments well while maintaining financial stability in other essentials and savings,” Letson said.
This is an example of a borrower making $5,000 a month.
36% rule
The 36% model is another way to determine how much of your total income you should head Your home loanand can be used in conjunction with the 28% rule. The 28% rule refers to the front-end DTI ratio, while the 36% rule refers to what is called the back-end DTI ratio.
“The 28% cap is about housing costs such as mortgages, taxes and insurance, while 36% is total debt burden, including credit cards and more. Car loan says Microburts, co-founder of City Creek Mortgage in Draper, Utah.
Let me once again say you earn $5,000 a month.
This rule allows you to spend $1,400 on monthly mortgage payments, but only if your other debt payments are under $400 per month.
43% DTI ratio
Mortgage lenders prefer not to exceed 36% DTI ratios on their backends, but in many cases, up to 43% is acceptable. At this level, your mortgage is still a “qualified mortgage”; Fannie May and Freddie Mac You can purchase from a lender.
Please note that some lenders may allow borrowers to have a higher DTI ratio with strong credit scores and substantial cash reserves.
Here’s what the 43% rule looks like with that $5,000 monthly salary:
Overall, however, the lower the DTI ratio, the more likely you are to get mortgage approval.
25% after tax
All of these estimates depend on your total income. But how much of your net profit, that is, your take-out salary, should you go to pay your mortgage?
Many experts recommend that under 25% of your post-tax income is headed towards you Monthly mortgage payments. Let’s say you’re making $5,000 a month, but you’re receiving $4,000 in your salary.
This net profit model can be more likely to pass if something is significantly affecting your take-home wage, such as wage decorations or aggressive retirement savings. It is also ideal for those who want a true daily sense of cash flow.
Mortgage payments, income, the housing market today
Many future home buyers are currently struggling with double wamy. High home prices and a 30-year mortgage rate, surpassing the 7% mark. The median mortgage payments for home buyer nationwide were $2,173 as of March 2025. Home Loan Banking Association.
According to an April 2025 Redfin report, Americans need to make $116,633 to buy a median home. This is someone who is difficult to reach the typical profitability of America. The median annual salary for full-time wages and payroll workers exceeds $62,000 based on data from the Bureau of Labor Statistics.
Today’s markets remind us of the importance of shopping. For the right lenders who can provide the lowest rates and for the right places where you can find a more affordable home.
What costs will you pay to compensate for your mortgage payment?
Main
The principal is the amount you borrowed to buy your home. When you first start paying off your mortgage, the servicer will apply the lower amount of your monthly payments to your principal obligation and apply the larger shares towards interest. This is called Amortization. As we approach the mortgage repayment, more payments are headed towards the principal.
interest
Interest is the fees you lend your money and pay the lender, the percentage of the total amount you borrowed to buy your home.
tax
Part of your monthly payment is probably Escrow accountand from there, head towards your property tax bill. When your bill is due, your servicer will pay it from the amount accumulated in your account.
insurance
Like your property tax, your servicer may also pay your homeowner’s premiums from your escrow account, where you fund with your monthly payments.
If you create less than 20% down payment In your home, you may be paying too Private mortgage insurance (PMI). This coverage protects lenders with loan defaults and is included in monthly mortgage payments.
How does the lender decide what you can afford?
We’ve created some general rules, but lenders use these and other factors to determine how much they can afford and how much they will lend. for example:
- Total income: Your total income is your total income before taxes and other deductions are considered. Other sources of income, including spousal support, pensions and rental income, are also included in the total income.
- DTI ratio: Lenders usually care most about their total obligations, divided by their total monthly obligations by their total income.
- Credit score: Credit scores are the main factor that lenders use to assess how much you can afford. Generally, the higher your credit score, the lower your interest rate.
- Work history: To be able to pay off your mortgage, lenders hope to have a stable source of income. You will usually be asked to provide evidence of employment (such as pay stubs) for at least the last two years. If you work for yourself, you will be asked to provide your tax return and other business records.
Should you spend the largest percentage of your income on a mortgage?
If possible, you should avoid spending the maximum percentage of your income on a mortgage. Spending maximums can potentially reduce your budget too much. This can cause excessive stress and potential economic hardships. Furthermore, the lower your mortgage payments, the more you can contribute to other financial goals, such as saving on retirement and paying off high-profit debts.
Remember: it can increase over time as it has an adjustable mortgage, deals with repair payments, property tax increases, or homeowner premiums. If you start spending the maximum percentage of your income, it may be difficult to understand how to cover those higher costs.
How to lower monthly mortgage payments
If you want to buy a house and think your mortgage might eat too much of your monthly income, there is a way to lower your payments. you could:
- Work on your credit score: A better credit score will earn you a lower interest rate, and even a slightly lower interest rate means paying much lower monthly. Test it with Bankrate’s mortgage calculator.
- Save for a bigger down payment: The more money you spend, the less you will need to borrow money for a mortgage. Plus, if you can beat at least 20%, you don’t need private mortgage insurance. This otherwise constitutes part of your monthly payment.
- Shop for homeowner insurance: If you can save money with homeowner insurance, you will be a little less likely to have to deposit into your escrow account each month.
Most homeowners opt for a 30-year mortgage, but if you’re looking for a 15-year mortgage, you know that monthly payments will be more affordable in the long run. And if you get a mortgage at a higher rate than you would like, you Refinance When prices drop, monthly payments will be reduced.
Other considerations for what you can afford
Homeownership Cost
Understanding how much of your monthly income should go on a mortgage is key to choosing an affordable home. However, so that the homeowner can prove it, Cost of owning and maintaining a home It’s not just mortgages, such as HOA fees and utility payments.
Other homeownership costs can include:
- Home maintenance including emergency funds and savings for future repairs
- Pest prevention
- Security System
If your budget doesn’t have some wiggling room for these expenses, we recommend you rethink how much you are willing to spend on a mortgage.
Home loan type
The type of mortgage you choose will also affect How much room can you afford. To find the perfect loan for you, it’s important to explore all options, including all options Traditional FHA and VA loans.
“You should have a deep conversation with your lender about your needs, desires and goals,” says Letson. “For your lender to help you, they need to understand everything you are trying to achieve. Without looking at the big picture, they cannot properly advise you on the best loan products for your scenario.”
Ultimately, the percentage of your mortgage payment income is just a small part of finding the right mortgage for you.
