How Much of Your Income Should Go Toward Your Monthly Mortgage Payment?
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Good morning and welcome. How much of your income should go toward your new mortgage payment? I can honestly say that it is best for you to make that decision, by letting your loan officer know how much you want your monthly mortgage payment to be. Why? because only you know how much you will be comfortable with. While the loan officer will let you know how much you qualify for and how much your monthly mortgage payments will be, based on the home you choose, property taxes, insurance, and the mortgage rate you will get, only you can truly know how much of your income you want to spend on your mortgage payment.
The type of loan you apply for will determine your DTI, however, the most popular guideline used to determine how much should be spent on mortgage payment is the 28/36% debt-to-income (DTI) approach. A rule that became popular in the late 1960s. However, things have changed, and lenders are using other methods that include the size of your down payment and extenuating circumstances to make qualifying decision. For example, if you apply for a FHA loan, the loan officer may use 31/43% (DTI) or 31/56.9% (DTI) to help determine your qualification.
That said, while the numbers may vary, the concept remains the same. That is, according to the 28/36% rule, your monthly mortgage payment should not exceed 28% of your total gross monthly income and your total monthly debt payments, including your mortgage payment should not exceed 36% of your total gross income.
For example, using conventional 28/36% DTI approach- If your gross monthly income is $7,000, your mortgage payment should be no more than $1,960 and your total monthly payments, including your mortgage payment should be no more than $2,520.
Using FHA 31/43% DTI approach - If your gross monthly income is $7,000 per month, your mortgage payment should be no more than $2,170 and your total monthly payments, including your mortgage payment should be no more than $3,010.
Keep in mind the figures above does not include HOA, water, car insurance, light, gas/for home and car, food, car repair/maintenance, entertainment, and other monthly expenditures. Therefore, all things considered, only you, and not the loan officer, can truly determine how much of your income, should go toward your new mortgage payment.
As always, thank you so much for stopping by. Remember, if you are thinking of purchasing your first home, please give us a call 713.208.8013 or Email us. We are here to help. We have been helping Houston first time home buyers since 2011 and we can help you. I hope you have an amazing day. Until next time...Diana
