What percentage of income should go to a mortgage?

The classic 28/36 rule says home buyers should limit housing costs to 28% of their gross monthly income, but this isn't a hard-and-fast rule for lenders.

In reality, every borrower is different. Your maximum housing costs could come in higher than 28% without jeopardizing loan approval.

This guide explores what percentage of income should go to a mortgage so you can find your right answer.

With the right information, you should be able to budget for your monthly mortgage payment without stretching your finances too thin.

What percentage of your income should go to your mortgage?

The 28% rule recommends keeping your monthly mortgage payment at 28%, or less, of your gross monthly income, but this rule doesn't work for everyone.

Let's take a closer look at 28/36 and other guidelines:

• The 28/36% rule - This two-part guideline affects both front-end and back-end ratios. Based on this rule, your housing costs shouldn't exceed 28% of your gross monthly income, while total debt payments (including your mortgage) should stay under 36% of monthly earnings. For example, with a gross monthly income of $8,000, your mortgage payment should remain below $2,240.
• The 35/45% rule - With this approach, your total monthly debt shouldn't go beyond 35% of your pretax income or 45% of your after-tax income. Simply multiply your pretax income by 0.35 or your post-tax income by 0.45.
• The 25% rule - This method works well if you prefer using net income. This rule says to keep housing costs under 25% of your take-home pay after taxes.

Mortgage lenders will review your debt-to-income ratio (DTI) when deciding whether to approve your application.

Typically, lenders want your monthly debt to stay below 43% of gross monthly income, though some accept ratios up to 50%. In any case, many home buyers exceed the 36% called for in the 28/36 rule.

Credit score affects budgeting, too

Your credit score plays a big role in the size of your loan payment. A higher score often leads to better loan terms and lower interest rates which leads to lower payments and easier qualification.

To get a sense for what you might pay each month, use a mortgage calculator to estimate payments based on your income. Budgeting for your monthly mortgage payment ahead of time. This knowledge can help avoid stretching your finances too thin.

Borrowers who want a shortcut can apply for a pre-approval to see an estimate based on their unique personal finances.

....in as little as 3 minutes – no credit impact

What does your monthly mortgage payment include?

A monthly mortgage payment includes more than repaying the mortgage loan. These add-on charges become part of your monthly housing expenses, so it's important to work them into any payment calculations.

A typical mortgage payment includes:

Principal and interest

The foundation of your mortgage payment is comprised of principal and interest.

• The principal represents the actual money you borrowed to buy your home
• Interest is what the lender charges for providing the loan.

When you first start making payments, a larger share goes toward interest, but as you continue making payments, more of the payment reduces your principal.

Property taxes and homeowners insurance

Lenders usually collect money for your home's property taxes and homeowners insurance alongside your principal and interest. These amounts go into an escrow account, from which your lender pays these bills on your behalf when they come due.

Property taxes fund local community services like public schools and police and fire protection. Tax rates vary based on your location and home value. Homeowners insurance protects your property against potential damage.

These four elements, principal, interest, taxes, and insurance, form what mortgage professionals call PITI.

Private mortgage insurance (PMI)

If you make a down payment less than 20% on a conventional loan, most lenders require private mortgage insurance (PMI). This fee protects the lender if you default on your loan.

For conventional loans, PMI typically costs between 0.5% and 1% of your loan amount yearly, split into monthly payments. Each mortgage payment includes 1/12th of the annual PMI premium.

Once you build 20% equity in your home, you can ask to have PMI removed.

HOA fees

Homes located within Homeowners Associations require monthly HOA dues. These fees vary a lot by location and by the level of services provided by the HOA.

A neighborhood with its own security staff, fitness center, pool, and nature trail will charge higher HOA fees than a neighborhood that maintains only a simple sign.

All of these payment components, and not just the principal and interest on the loan, will factor into your debt-to-income ratio.

Mortgage approval requirements

When lenders review your mortgage application, they look at much more than just how much you earn. They also consider what you spend.

Knowing these requirements helps you prepare for the approval process with confidence.

Front-end vs. back-end DTI ratios

Lenders rely on two different debt-to-income calculations to judge what you can afford.

• The front-end ratio shows what portion of your gross monthly income goes to housing costs. You can find this number by dividing your expected monthly mortgage payment by your monthly income before taxes. Someone who earns $6,000 a month and spends $1,500 on the mortgage would have a front-end ratio of 25%.
• The back-end ratio takes a wider view by comparing all your debt payments, including the new house payment, to your income.

Back-end DTI is the number most borrowers think about when they measure DTI, but a borrower must qualify with front-end and back-end ratios.

Debt-to-income ratio (DTI ratio) and its impact

Despite the popularity of the 28/36 rule, most lenders want your back-end DTI to stay under 43% of your gross monthly income, though some will go up to 50%, especially on FHA loans.

This number shows how comfortably you can manage a mortgage payment along with your existing financial commitments.

Visit what is a good debt-to-income ratio for more details or explore ways for improving your debt-to-income ratio.

Role of credit score and income stability

Your credit score tells lenders about your bill-paying habits. For conventional loans, you'll typically need a FICO score of at least 620, but this varies by loan type.

In general, better credit scores unlock better interest rates. Learn how your credit score affects your mortgage for the full story.

Importance of down payment size

How much you put down affects both your approval chances and your monthly costs. While 20% down isn't required, larger down payments shrink your monthly obligation and help you avoid PMI.

Use a mortgage calculator to see how different down payments change your situation and check current mortgage rates for the latest information.

A mortgage pre-approval can show how all these variables work together for you.

....in as little as 3 minutes – no credit impact

Lowering your mortgage monthly payment

If the price of your dream home pushes your mortgage application beyond your budgeted payment amount, there are a few ways to lower the monthly payment:

Boost your credit score

Lenders reward higher scores with better interest rates, potentially saving you thousands over the life of your loan. Even a modest score improvement can cut your interest costs and lower monthly payments. 

Make a larger down payment

If you can pay more up front, you can lower the loan size and loan payments. Few first-time buyers can afford to put 20% down, but moving from 5% to 7% can also make a difference.

Get a longer loan term

Spreading your principal balance over 30 years instead of 15 creates lower monthly payments, though it increases total interest paid throughout the loan. This trade-off might make sense depending on your financial goals and cash flow needs.

You can test different scenarios using a mortgage calculator to see how each approach affects your payments. Then create a plan to budget for your monthly mortgage payment that keeps your housing costs within an appropriate percentage of your gross monthly income.

FAQs about how much income should go to a mortgage

Still wondering about mortgage affordability? These questions might help.

What credit score do I need to have a lower monthly mortgage payment?

Most lenders require a minimum credit score of 620 for conventional loans, though this varies by loan type. A higher score can get you better interest rates, potentially saving thousands over your loan term. To raise your score, pay bills on time, reduce credit card balances, and avoid new credit applications before seeking a mortgage.

Should I put in a larger down payment?

Your down payment size directly influences your monthly mortgage costs. A larger upfront payment lowers both your loan amount and monthly obligation.

Use a mortgage calculator to see how different down payments affect what's included in your monthly payment.

What's better: A longer loan term with lower monthly payment, or shorter loan term with less interest?

Extending your loan term spreads your principal balance over more years, lowering monthly payments. Switching from a 15-year to a 30-year mortgage can reduce your monthly obligation, making it easier to stay within recommended income percentages.

This approach means paying more interest over the life of the loan, but may be worth considering if monthly affordability is your main concern.

With Better, you can see what you're approved for in as little as 3 minutes with no credit impact.

....in as little as 3 minutes – no credit impact