How Much of Your Gross Income Should Go to Mortgage: A Real Breakdown

When you’re eyeing your dream home, one question keeps you up at night: how much of your gross income should go to mortgage payments? The answer isn’t as simple as a single number—lenders, financial advisors, and your own situation all play a role. But here’s the thing: knowing the different models can help you figure out what actually works for your wallet.

The Problem: Why This Matters More Than You Think

Most first-time buyers either overextend themselves or play it too safe. They either get approved for a mortgage amount and immediately buy a house at that price, or they second-guess themselves and miss out on opportunities. The reality? Your lender’s approval limit and what you should actually spend are two different things. That’s where understanding income-to-mortgage ratios comes in.

The Main Models That Lenders Use

Your earnings aren’t just about getting approved—they’re about staying financially healthy. Here are the frameworks lenders and financial professionals rely on:

The 28% Rule: The Conservative Start

This is the most straightforward approach: don’t let your monthly mortgage payment exceed 28% of your monthly gross income. This includes principal, interest, property taxes, and homeowner’s insurance.

Think of it this way—if you’re bringing in $7,000 gross monthly, you’re looking at about $1,960 max for your mortgage-related costs. It’s clean, it’s simple, and it gives you plenty of breathing room.

The 28/36 Framework: Balancing All Your Debt

This model builds on the 28% rule but adds another layer. While your mortgage takes up 28% of gross income, your total debt—including credit cards, car loans, utilities, and other obligations—shouldn’t exceed 36%.

Using the same $7,000 monthly income: you’re capped at $1,960 for the house and $2,520 total for everything. That leaves you about $560 to cover other monthly debts beyond the mortgage. It forces you to think about the full picture of what you owe.

The 35/45 Model: Flexibility for Varying Situations

Some people prefer working with different numbers. This approach says your total debt (including mortgage) shouldn’t exceed 35% of your gross income. Or, alternatively, no more than 45% of your take-home pay should go toward total monthly debt.

With $7,000 gross, that’s $2,450 maximum for all debt. But if your actual take-home after taxes is $6,000, then 45% of that gives you $2,700. You’re working with a range here—$2,450 to $2,700—which can feel less restrictive.

The 25% Post-Tax Model: The Tightest Constraint

This one uses your net income (take-home pay after taxes) instead of gross. The rule: keep your mortgage payment to 25% of that number.

It’s the most conservative approach. If you’re taking home $6,000 monthly, your mortgage shouldn’t exceed $1,500. Why choose this? If you’re already juggling significant debt like student loans or car payments, this method prevents you from overcommitting.

What You Actually Need to Calculate Your Own Number

Every person’s situation is different, so let’s talk about what actually matters:

Your actual income figures come from your pay stubs—both gross and net. If your income isn’t steady, pull your last couple of tax returns to get a realistic picture.

Your existing debt is everything you owe: credit cards, student loans, car payments, personal loans. This isn’t the same as day-to-day expenses like groceries. Debt is what you’ve committed to paying monthly.

Your down payment directly affects your monthly payment. A 20% down payment can eliminate private mortgage insurance (PMI), though it’s not required. The bigger your down payment, the smaller your monthly obligation becomes.

Your credit score determines your interest rate. Better credit usually means lower rates, which means lower monthly payments. It’s worth paying attention to before you apply.

How Lenders Actually Decide What You Can Afford

Here’s what’s happening behind the scenes: lenders calculate your debt-to-income ratio (DTI). They add up all your monthly debt payments and divide by your gross monthly income.

Let’s say your monthly income is $7,000, your car payment is $400, student loans are $200, credit card minimum is $500, and you’re testing a potential mortgage of $1,700. That’s $2,800 total. Your DTI? 40% ($2,800 ÷ $7,000).

Generally, lenders like to see a DTI between 36% and 43%. The lower you go, the stronger your application looks. Different lenders have different comfort levels, so shopping around for the best mortgage lender makes a real difference.

Practical Ways to Reduce Your Monthly Payment

If the numbers aren’t working the way you want, you have options:

Look at a lower-priced home. Just because you’re approved for $500,000 doesn’t mean you have to spend it all. A home at $450,000 takes real pressure off your monthly budget.

Save more for a down payment. Every percentage point higher reduces what you’re financing. Going from 10% to 20% down could save you hundreds monthly.

Improve your interest rate. This comes down to your credit score and DTI. Pay down existing debt—credit cards especially—and watch both improve. A better credit profile = better rates = lower payments.

The Hidden Costs Nobody Talks About Until It’s Too Late

The mortgage payment is just part of it. Budget for:

• Maintenance and repairs: Roofs fail, pipes leak, systems break down. Set aside money regularly.
• Lawn and landscaping: Whether you hire someone or do it yourself, this costs money.
• Home improvements: Outdated systems, worn fixtures, cosmetic upgrades—the inspection will tell you what needs attention.

These aren’t optional. They’re part of homeownership, and they’re often where people get financially stressed after buying.

The Bottom Line

Your gross income absolutely determines how much house you can afford, but so does your debt, credit score, and down payment. The 28% rule gives you a solid starting point, the 28/36 model keeps you balanced, the 35/45 approach offers flexibility, and the 25% post-tax method keeps you safest if you’re already debt-heavy. Pick the framework that matches your actual financial situation—not just what gets you approved, but what keeps you comfortable for the next 15 to 30 years of payments.