Key takeaways
- Typically, experts recommend you spend no more than 28 percent of your gross monthly income or 25 percent of your net monthly income on mortgage payments.
- Today, you may find yourself spending substantially more on your mortgage due to high home prices in certain parts of the country.
- Lenders generally want a homebuyer’s mortgage and other monthly debt payments to total no more than 43 percent of their income, ideally closer to 36 percent.
When you’re shopping for a home, think carefully about how much of your monthly income you can reasonably dedicate to your mortgage payment. Figuring this out can mean the difference between living comfortably and being “house poor” — struggling to make ends meet month after month.
But how can you figure out how much to spend on your mortgage? Here are a few different rules you can apply.
What percentage of your income should go to your mortgage?
Every borrower’s situation is different, and it’s possible no one rule will fit you perfectly. But these are a few of the schools of thought on what percentage of income should go to mortgage payments.
28% rule
“The 28 percent rule is a traditional mortgage lending guideline stating that a homebuyer’s monthly mortgage payment shouldn’t exceed 28 percent of their gross monthly income. This includes principal, interest, taxes, and insurance,” says Reed Letson, owner of Elevation Mortgage in Colorado Springs, Colorado.
This 28 percent cap is based on a borrower’s front-end debt-to–income (DTI) ratio, or the amount of their monthly income — before taxes — that’s taken up by their mortgage payment.
“It’s based on decades of lending data showing that borrowers who keep their housing costs at or below this threshold are more likely to successfully manage their mortgage payments while maintaining financial stability for other necessities and savings,” Letson says.
Here’s an example of a borrower who earns $5,000 per month.
$5,000 x 0.28 (28%) = $1,400 (maximum monthly mortgage payment)
36% rule
The 36 percent model is another way to determine how much of your gross income should go toward your mortgage, and it can be used in conjunction with the 28 percent rule. While the 28 percent rule refers to your front-end DTI ratio, the 36 percent rule refers to what’s called your back-end DTI ratio.
“The 28 percent cap is about your housing costs — mortgage, taxes, insurance — and the 36 percent is your total debt load, including things like credit cards, car loans and student loans,” says Mike Roberts, co-founder of City Creek Mortgage in Draper, Utah.
In other words, lenders prefer that no more than 28 percent of your gross income be devoted to housing expenses, and no more than 36 percent be devoted to total debt payments, including your mortgage.
Let’s say again that you have a $5,000 monthly income.
- $5,000 x 0.28 (28%) = $1,400 (maximum monthly mortgage payment)
- $5,000 x 0.36 (36%) = $1,800 (maximum monthly debt obligation including mortgage payment)
By this rule, you could still spend $1,400 on your monthly mortgage payment — but only if your other debt payments total $400 or less per month.
43% DTI ratio
While mortgage lenders prefer your back-end DTI ratio not exceed 36 percent, in many cases, up to 43 percent is acceptable. At this level, your mortgage is still a “qualifying mortgage,” and Fannie Mae and Freddie Mac can purchase it from your lender.
Keep in mind that some lenders may allow borrowers to have higher DTI ratios with a strong credit score and substantial cash reserves.
Here’s how the 43 percent rule looks with that $5,000 monthly income.
$5,000 x 0.43 (43%) = $2,150 (maximum monthly debt obligation including mortgage payment)
Overall, though, the lower your DTI ratio, the higher your chances of getting approved for a mortgage.
25% post-tax model
These estimates all rely on your gross income. But how much of your net income — that is, your take-home pay — should go toward mortgage payments?
Many experts recommend that no more than 25 percent of your after-tax income go toward your monthly mortgage payments. Say you make $5,000 per month, but you receive $4,000 in your paycheck.
$4,000 x 0.25 (25%) = $1,000 (maximum monthly mortgage payment)
This net income model might be more helpful if something is affecting your take-home pay, like wage garnishment or aggressive retirement savings. It’s also ideal if you want a real daily sense of your cash flow.
Mortgage payments, income and today’s housing market
Many prospective homebuyers are struggling with a double whammy right now: high home prices and 30-year mortgage rates close to 7 percent, much higher than they were a few years ago. The median mortgage payment for home purchase applicants nationwide was $2,186 as of April 2025, according to the Mortgage Bankers Association.
Americans need to earn $116,633 to afford the median-priced home, according to an April 2025 Redfin report. That’s a tough figure for the typical American worker to reach: The median annual earnings for full-time wage and salary workers is just over $62,000, based on data from the Bureau of Labor Statistics.
Today’s market is a reminder of the importance of shopping around — for the lender that can offer you the lowest rate and for a home you can afford.
Bankrate insight
Sixty-four percent of Americans said they would be willing to make a change to find more affordable housing, and 24 percent said they’d be willing to move out of state, according to Bankrate’s 2025 Home Affordability Report.
What costs make up your mortgage payment?
Principal
The principal is the amount of money you borrowed to purchase your home. When you first start repaying your mortgage, your servicer applies a smaller amount of your monthly payments to your principal debt and a larger share toward interest. This is called amortization. When you’re closer to paying off your mortgage, more of your payments will go toward principal.
Interest
Interest is the fee you pay the lender for lending you money, a percentage of the total amount you borrowed to buy your home.
Taxes
A portion of your monthly payments likely goes into an escrow account, and from there, goes toward your property tax bill. When your bill is due, your servicer pays it from the amount accumulated in your account.
Insurance
Similar to your property taxes, your servicer likely also pays your homeowners insurance premiums from your escrow account, which you fund with your monthly payments.
If you made less than a 20 percent down payment on your home, you may also be paying for private mortgage insurance (PMI). This coverage protects the lender in case you default on the loan, and it’s included in your monthly mortgage payment.
How do lenders determine what you can afford?
We’ve laid out some general rules, but lenders use these and other factors to decide how much you can afford — and how much they’ll lend you. For example:
- Gross income: Your gross income is your total earnings before taxes and other deductions. Other sources of income — such as spousal support, a pension or rental income — are also included in gross income.
- DTI ratio: Lenders typically care most about your total monthly debt obligations divided by your total gross income.
- Credit score: Your credit score is a major factor lenders use to evaluate how much you can afford. In general, the higher your credit score, the lower your interest rate, which impacts how much you can feasibly spend on a home.
- Work history: To ensure you can repay your mortgage, lenders want you to have a stable source of income. You’ll typically be asked to provide evidence of employment, such as a pay stub, from at least the past two years. If you work for yourself, you’ll be asked to provide tax returns and other business records.
Should you spend the maximum percentage of your income on a mortgage?
Even if you can get approved for a mortgage that would make your total debt load 43 percent — or more — of your income, you may want to reconsider. Spending so much on your mortgage could stretch your budget too thin, which can cause you undue stress and potential financial hardship. Plus, the less you have to pay for your mortgage, the more you can contribute to other financial goals, such as saving for retirement or paying off high-interest debt.
Keep in mind: Housing costs can increase over time, whether that’s due to having an adjustable-rate mortgage, paying for repairs or dealing with increasing property taxes or homeowners insurance premiums. If you start out spending as much as your lender allows, it could be challenging to cover those higher costs.
How to lower your monthly mortgage payments
If you want to buy a house, but you think a mortgage might eat up too much of your monthly income, there are ways to lower your payment. You can also reduce your mortgage payments after you’ve already bought. Options include:
- Working on your credit score: A better credit score will earn you a lower interest rate, and even a slightly lower rate can mean a much lower monthly payment. Test it out with Bankrate’s mortgage calculator.
- Saving up for a bigger down payment: The more money you put down, the less you’ll need to borrow for your mortgage. Plus, if you can put down at least 20 percent, you won’t need private mortgage insurance, which would otherwise make up part of your monthly payment.
- Extending your loan term: While most homeowners choose a 30-year mortgage, if you were considering a 15-year mortgage, know that a longer term would make your monthly payments more affordable.
- Shopping around for homeowners insurance: If you can save money on your homeowners insurance, you can deposit a little less in your escrow account each month.
- Asking for a tax reassessment: You may ask your local government to reconsider the amount you’re being charged for property taxes. If an assessor determines that your taxes are unfairly high, you could owe less toward your escrow account on a monthly basis. On the other hand, an assessor could also decide that you should be paying more in taxes, so this approach can be risky.
- Refinancing: If you do end up with a mortgage with a higher rate than you’d like, you can refinance when rates drop, reducing your monthly payment. You may also score a lower rate if your credit has improved since you first applied.
Other considerations for what you can afford
Costs of homeownership
Figuring out how much of your monthly income should go to a mortgage is key to choosing an affordable home. But as any homeowner can attest, the expenses of owning and maintaining a home include much more than just the mortgage, such as HOA fees and utility payments.
Other homeownership costs can include:
- Home maintenance, including an emergency fund and savings for future repairs
- Pest prevention
- Security systems
If your budget doesn’t have some wiggle room for these expenses, you may want to reconsider how much you’re willing to spend on your mortgage.
Mortgage type
The kind of mortgage you choose also impacts how much home you can afford. To find a loan that’s right for you, it’s important to explore all your options, including conventional, FHA and VA loans.
“You should have a deep-dive conversation with your loan officer about your needs, wants, and goals,” Letson says. “In order for your loan officer to help you, they need to understand everything you are trying to accomplish. Without seeing the full picture, they will not be able to properly advise you on the best loan product for your scenario.”
Ultimately, the percentage of your income for mortgage payments is just one portion of finding the right home loan for you.
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