How Much Should You Spend on Mortgage Payments?
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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 https://dc.urbanturf.com/articles/blog/how_much_should_you_spend_on_mortgage_payments/591.
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