What Percentage of Income Should Go to a Mortgage?

Posted: 11/10/2020 | Read Time: 2min

Buying a home for the first time can be overwhelming. From learning how much house you can afford and what percentage of income should go to a mortgage, there are some major mortgage questions you must first answer before you can begin the search for your dream home. Let’s discuss what percentage of income should go to a mortgage, why this income guideline exists, and the steps you can take to find out how much house you can comfortably afford.

What Percentage of Income Should Go to a Mortgage?

The answer to what percentage of income should go to a mortgage depends on the lender. While most lenders agree that you should spend no more than 28% of your monthly gross income on your mortgage payment (including principal, interest, taxes and insurance), some lenders will approve up to 41 percent for borrowers who have no other debt, according to the Federal Housing Association (FHA).

Where Did the Income Percentage Guideline Come From?

This 28% guideline is the “sweet spot” mortgage lenders use when making lending decisions, and for a good reason. In 2008 the United States experienced the worst recession in our nation’s history since the Great Depression due to lenders financing home mortgage loans that homeowners couldn’t afford to pay back. Since then, lenders have come a long way in creating lending rules and guidelines that must be met in order to qualify for a home loan, including suggested debt-to-income ratios, minimum credit scores and limiting what percentage of income should be spent on a mortgage.

Why is Following the Income Percentage Guideline Important?

You’ve probably heard the saying, “don’t put all your eggs in one basket.” This idiom certainly rings true for home financing. Aside from avoiding another national housing and economic crisis, lenders do their best to safeguard individual borrowers from making hefty financial decisions with no room for emergencies or other life expenses. Setting a guideline by which homeowners are not to borrow more than a fixed percentage of their gross income decreases their risk of becoming “house poor,” spending a majority of their income on mortgage obligations and leaving little cash reserves for other expenses like car or credit card payments and medical bills.

How Much Home Can You Afford?

With current home mortgage rates at historic lows, now may be a good time for you to assess what buying power you hold in today’s market. One of the first steps any first-time home buyer should take is to get an idea of how much home you can comfortably (and realistically) afford. The easiest way to do this is by using a simple mortgage calculator that factors in important financial information like your annual income, down payment amount, monthly debts, interest rate (a mortgage rates chart will help you get an estimated rate), and desired purchase location. The home price generated will provide valuable insight into your home buying capabilities, signaling whether you’re ready to buy or if there’s more work to be done to safely and comfortably buy a home within your means.

Whether you have other questions to ask a loan officer or want more information about lending requirements or mortgage pre-approvals, Wyndham Capital Mortgage’s expert mortgage loan officers are ready to help. Contact us today and discover the difference a digital lender will make in your pursuit to become a homeowner.


Matthew Harris is the Internal Communications Manager at Wyndham Capital Mortgage. With over 11 years of experience writing and creating content about topics from sports and culture to financial systems and business, Matthew brings his expertise to the mortgage industry. Matthew oversees Wyndham’s internal communication and content strategies to help drive the internal messaging and creating content that gives both employees and borrowers relevant and reliable information to help them make informed homebuying, selling and refinancing decisions. Matthew has a Master’s Degree in Communications from Purdue University and a Bachelor's Degree in Journalism from Appalachian State University. His interests include social media marketing, content creation and catching the occasional sports game.

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