Buying a home is a dream for many. But affording that home? That’s the tough part. The biggest question most people face is simple: What percentage of your income should go to a mortgage? It’s a big decision. Your financial future can ride on it. Spend too much, and you may struggle. Spend too little, and you might miss out on the home you want.
Several rules exist to guide homebuyers. Some are old, some are new, and some come from lenders. But they all try to answer the same question—how much can you safely afford?
Let’s break it down, rule by rule, using real numbers, plain language, and today’s realities.
What Percentage of Your Income Should Go to Your Mortgage?
There’s no one-size-fits-all answer. But many financial experts agree on a few standard rules. These aren’t set in stone. They serve as guidelines to help you keep your housing expenses in check.
In general, your monthly mortgage payment should not exceed 25% to 28% of your gross monthly income. But some lenders approve buyers with higher debt-to-income ratios. That can lead to higher risk if not managed well.
We’ll look at each model and explain how it works.
The 28% Rule
The 28% rule is one of the oldest in the book. It says your mortgage payment should not be more than 28% of your gross monthly income. Gross means income before taxes, not what hits your bank.
This rule covers only your housing costs. That includes your mortgage, property taxes, homeowners insurance, and possibly HOA fees. It doesn’t include your other debts.
Here’s an example. Let’s say you earn $6,000 a month before taxes. According to the 28% rule, your total mortgage-related costs should stay under $1,680.
This rule is conservative. It leaves room for savings, emergencies, and other life expenses. But not everyone sticks to it—especially in high-cost cities where homes are more expensive.
Still, the 28% rule is a solid benchmark for keeping your budget balanced.
The 36% Rule
While the 28% rule focuses on housing, the 36% rule looks at all your debts. It says your total debt payments should not exceed 36% of your gross income.
This includes mortgage payments, car loans, credit cards, student loans, and any other recurring debt.
Let’s say you earn $6,000 a month. That gives you a total debt limit of $2,160. If your student loan is $400 and your car payment is $350, you have $1,410 left for a mortgage.
This rule helps you keep an eye on the bigger picture. Housing is just one part of your financial puzzle. The 36% rule ensures you don’t drown in debt—even if you qualify for a big mortgage.
Lenders use this rule during pre-approval. It shows them how much risk they take when giving you a loan. But it’s also helpful for you. Knowing your own limits can prevent future regret.
The 43% DTI Ratio
Some lenders push things further. That’s where the 43% rule comes in. It’s the maximum debt-to-income ratio allowed by many mortgage programs, including those backed by the government.
This means all your debts—housing included—can add up to 43% of your gross monthly income. It’s the ceiling, not the goal.
For example, with a $6,000 income, 43% equals $2,580. That includes your mortgage and all other debts. If your credit card bills and loans total $800, then your mortgage must fit within $1,780.
Why does this rule matter? Because some lenders will approve you even if you’re at this limit. But that doesn’t mean you should go that high. The risk of financial stress increases when you stretch your budget too far.
Use the 43% rule as a warning light. If you’re getting close to it, you may want to rethink the size of the mortgage you’re taking on.
The 25% Post-Tax Model
The post-tax model offers a different approach. It uses your take-home pay instead of your gross income. And it’s more in line with how most of us budget.
This model suggests that your mortgage payment should not exceed 25% of your net income. That’s the money you actually bring home after taxes and deductions.
Let’s break that down. If your monthly take-home pay is $4,500, then your mortgage should stay below $1,125.
This method reflects your real-world spending ability. It encourages you to live within your means. It also leaves more room for savings and emergencies.
Some personal finance experts prefer this rule. It’s practical. It feels more human than the gross-income rules used by banks. If you want to build wealth while owning a home, the 25% post-tax rule is a smart place to start.
Mortgage Payments, Income, and Today’s Housing Market
These rules sound great on paper. But the housing market in 2026 looks a lot different than it did ten years ago. Home prices are high. Interest rates have fluctuated. And wages haven’t always kept up.
That creates a real problem. Many buyers find that sticking to 28% or even 36% just isn’t realistic in their area. They end up paying 40% or more of their income on housing.
That’s why it’s important to look beyond the rules. Context matters. If you live in San Francisco or New York, the numbers will look different. You might stretch your budget more in exchange for a long-term investment.
Still, financial safety should come first. Before maxing out your loan approval, ask yourself: Can I handle this if my situation changes? What if I lose income or have an emergency?
Some homeowners share how things went south. One person bought a condo in 2022, thinking they’d rent out a room. The rent never came. Their income dipped. They fell behind. That 38% mortgage became 60% of their income overnight.
It’s a reminder that rules are guides, not guarantees.
What Costs Make Up Your Mortgage Payment?
It’s easy to say “mortgage payment,” but what does that really include? Let’s look at the components that make up that number.
Interest
Interest is the price you pay for borrowing money. It’s a key part of your mortgage payment, especially early on.
During the first few years of your mortgage, most of your monthly payment goes toward interest, not the loan itself. This surprises many buyers.
The rate you get matters. A 6% mortgage rate will cost much more in interest than a 4% rate on the same loan. Even a small rate change can add hundreds to your payment.
Interest also affects how much home you can afford. The higher the rate, the less you can borrow while staying within budget.
Shopping around for a better rate can save you thousands. It’s worth the effort.
Principal
The principal is the amount you borrowed. Every payment you make chips away at this balance—slowly at first, then faster over time.
If you borrow $300,000, your goal is to reduce that to zero. That’s your loan’s life. The faster you pay the principal, the less interest you’ll pay overall.
Some buyers choose shorter loan terms, like 15 years instead of 30. That means higher monthly payments, but lower total interest. It’s a trade-off.
Taxes and Insurance
Property taxes vary by location. Some areas charge thousands per year. That cost gets added to your monthly mortgage payment.
Homeowners insurance protects your house. It’s also required by lenders. This cost also becomes part of your monthly bill.
If you’re part of a condo or HOA, expect more fees. Those go into the monthly payment calculation as well.
Private Mortgage Insurance (PMI)
If your down payment is less than 20%, most lenders require PMI. This insurance protects them if you default. It’s another monthly cost added to your bill.
PMI isn’t forever. Once you build enough equity, you can often remove it. But it’s something to consider when calculating affordability.
Conclusion
So, what percentage of your income should go to a mortgage? The answer depends on your financial health, location, and risk tolerance.
Here’s a quick recap:
- The 28% rule is a safe housing-only guide.
- The 36% rule considers total debt.
- The 43% rule is the lender’s upper limit.
- The 25% post-tax model is practical and realistic.
Use these numbers as tools. Adjust based on your life, your market, and your goals. A home is a big step, but it shouldn’t become a burden. Balance your dreams with discipline. That’s the sweet spot.
