What Percentage of Income Should Your Mortgage Be?

A common guideline for how much of your income should go toward a mortgage is:

1. The 28% Rule (Housing Expense Ratio)

• Recommended: Your monthly mortgage payment (including principal, interest, property taxes, and insurance) should not exceed 28% of your gross monthly income.
• This helps ensure your housing costs are manageable relative to your income.

2. The 36% Rule (Debt-to-Income Ratio)

• Lenders often look at your total debt payments (including mortgage, car loans, credit cards, etc.) and prefer this to be no more than 36% of your gross monthly income.
• This means your mortgage plus other debts combined should stay within this limit.

Practical Example

• If your gross monthly income is $5,000:
  • Mortgage payment ideally ≤ $1,400 (28% of $5,000)
  • Total debt payments ideally ≤ $1,800 (36% of $5,000)

Why These Percentages Matter

• Staying within these limits helps maintain financial stability.
• It reduces the risk of default and financial stress.
• Allows room for other expenses and savings.

Final Tip

• Consider your personal financial situation, including other debts, living expenses, and savings goals.
• Some financial advisors recommend being even more conservative if you want more flexibility.

If you want, I can help you calculate your ideal mortgage payment based on your income!