According to this rule, your mortgage payment should not exceed 28% of your monthly income before tax and 36% of your total debt. This is also known as debt-income ratio (DTI).
What is a good rule of thumb for making a mortgage payment?
You use your debt-to-income ratio (DTI) to ensure that you can conveniently pay both your mortgage and other debts. The total cost of housing includes mortgage loan payment, interest, property taxes, insurance and HOA fees, excluding utility costs. If you have several months of mortgage payments for emergency savings, you can keep the house while you look for new work. In that case, it may make sense to work backwards before you opt for a percentage of income for your mortgage payment.
Multiply that by 28% and that’s roughly what you can expect to spend on your monthly mortgage payment each month.
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Barry Ritholtz is a renowned finance expert, author and blogger. With over 30 years of experience in the financial industry he has gained a reputation as a thought leader and influencer in the investment community.