How Much Should You Spend on Mortgage Payments?

by Mark Wellborn


Many Americans are finding themselves paying up to 50 percent of their annual income to cover the mortgage on their home. As the Obama administration recently announced that its goal for homeowners is that 31 percent of their yearly salary go toward mortgage payments, we decided to speak with an area professional and get his take.

“It’s a difficult question to answer,” he told UrbanTurf. “There are a lot of variables. Someone who has no other monthly debt can qualify for more of a mortgage payment than someone who has other payments they need to make.”

The individual (who, because of company policy, could not be named in this article) said that as a general rule, housing payments should be at or below 40 percent of a person’s annual income. But because most of his clients are saddled with other payments, that number is usually around 25 to 35 percent.

“If your total debt can be maxed at 45 percent of your annual income (car payments, student loans, and revolving debts, but not everyday expenses) then you are in good shape.”

Below we outline two scenarios for people in different income brackets:

Scenario 1:

  • Annual salary: $75,000
  • Monthly salary (after taxes): $4,500
  • Car payments: $300/month
  • Student loans: $400/month
  • Mortgage payments at 30% of salary: $1,875
  • Monthly income after payments: $1,925

Scenario 2:

  • Annual Salary: $50,000
  • Monthly salary (after taxes): $2,900
  • Mortgage payments at 30% of salary: $1,250
  • Monthly income after payments: $1,650

This article originally published at http://dc.urbanturf.com/articles/blog/how_much_should_you_spend_on_mortgage_payments/591


  1. andypoo said at 12:37 pm on Friday February 27, 2009:

    The above calcs look a bit generous, they don’t look like they include much of a 401k or other deductions, such as a healthplan or other costs. 

    Let’s also take into consideration property taxes, condo fees, etc. to get a real picture of what one can truly afford.  Not to mention car insurannce and other necessary fixed costs that one must bear. 

    This is the picture that needs to be painted in order for people to better understand what they can truly “afford”.

  1. km said at 2:18 pm on Friday February 27, 2009:

    To be consistent, “Mortgage payments at 30% of salary” should say “ANNUAL salary” on a monthly basis. The 30% figure for mortgage is based on your annual/gross salary, not your after-tax salary.

  1. Geori said at 12:24 pm on Monday March 2, 2009:

    Is there a link to the white house’s official statement?

    Taxes make this calculation much more complex. It’s not just “you can spend X% on rent”.  Interest Payments would generate $500 in tax credit in scenario 1.  Roll in Property Tax and account for the tax credit and you are talking $100 - $200 in monthly savings over a rental at the same amount as the mortgage.

  1. Mark Wellborn said at 4:08 pm on Monday March 2, 2009:


    Here is the link to an MSNBC article that gives the 31 percent number.



  1. Percentage Of Salary To Your Mortgage said at 10:20 pm on Friday April 9, 2010:

    Someone asked me the same question, I said that your mortgage should be about 25-35% of your gross salary, depending on your current debt levels.  http://www.furioustees.com/How_much_of_your_monthly_salary_should_your_mortgage_be-qna2100.html

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