What Percent of my Income Should be Devoted to My Mortgage Payment?

home-buyers-mortgage-paymentBefore purchasing a home, it’s important to determine the percentage of your income that you will be able to dedicate towards your mortgage. The first step is to assess your current income and outstanding debt and make an accurate but conservative estimate about the amount of house you can afford. Asking the question “What’s my mortgage payment going to be is a great place to start!”

Mortgage Calculators

If you’re using an online mortgage calculator, it’s likely operating on a front-end ratio. This means they’re measuring your gross income rather than net pay to determine what amount you can dedicate toward your mortgage. You’ll often find that online mortgage calculators use 28 percent of your gross income. However, other things to be considered besides the principal and interest on your mortgage payment include property taxes, mortgage insurance and home insurance.

Back-End Ratio

A back-end ratio may be more beneficial for helping to determine a potential mortgage payment if you are carrying a significant amount of debt. The back-end ratio considers your current ongoing debts such as student loans, credit cards, child support, mortgage payments, etc. when determining your potential mortgage payment. This ratio has a standard 36 percent debt-to-income ratio in the mortgage industry.

Percent of Income

When assessing the amount of your income that will be used toward your mortgage, the mortgage product, your credit and a down payment are influential factors. Begin by determining your ideal debt-to-income ratio. Your total debt-to-income ratio includes your housing payment (mortgage, homeowners insurance, property taxes) and your existing debts.

Helpful Tips

We highly recommend that your mortgage payment not exceed 31 percent of your monthly gross income. As far as your total monthly payment obligations (mortgage, student and car loans, child support, etc.), these should not exceed 43 percent of your monthly earnings.

VA Loan Benefits

For home buyers qualified for a VA loan, no down payment in necessary. For more information on qualifying for a VA loan or to get pre approved, contact Midwest VA Loans today.

22 Comments
  1. Good tips, thanks for the percentages.

  2. Great tips. Thanks!

  3. Lots of great information here.

  4. It’s difficult to get that all figured out sometimes.

  5. So many things to think about when buying a home but these seem like very good tips. Thank you

  6. Real good information here, I would have thought you would want closer to 40-45 for your mortgage.

  7. Do you recommend a specific number less than 43% though? I know you said that was the max, but should we aim for a certain percent?

  8. Welcome to the adult world, expensive! Thanks so much for your great tips.

  9. I like the idea of using the back-end ratio because I feel it is closer to the amount I actually have to spend.

  10. There is just so much to think about when it comes to getting a home, thanks for the good tips.

  11. Great information for home buyers! Thanks

  12. I don’t understand much about mortgage. These tips are very informative.

  13. Great information you’ve passed along. Thanks a bunch.

  14. These are some useful tips. Thanks a bunch.

  15. I’ve always heard the rule of thumb for mortgage or rent payments should be no more than 25% of your income. Great info!

  16. Great tips on such a complex issue.

  17. So much to understand around mortgage issues. It’s always better to ask for help.

  18. Who doesn’t need help with their mortgage?

  19. These things are so confusing. Way too much information to go over?

  20. Mortgage is nothing to mess around with, you could end up paying way more than is necessary.

  21. Good tips; they have seminars, however, that go into much greater detail on this important subject. Thanks for the start, though!

  22. Thank you for the simple break down of different percentages you should use for buying a house.

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