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What is a Reasonable Mortgage Payment for My Income?

What is a Reasonable Mortgage Payment for My Income?

A home is a big expense, there's no getting around that. But owning a home should make you feel secure, not stressed about making your mortgage payments each month. When deciding to purchase a home, knowing the reasonable amount you can expect to pay monthly can help make a final decision on offer price. Here are some things to consider when deciding a mortgage amount.

1.Your annual income and expenses.

The old rule of thumb says a home should cost between two-to-three times your annual income. This means if you make $100,000 a year, your home should cost between $200,000 and $300,000. However, this rule doesn't take into consideration any monthly debts, like car payments, student loans and credit card payments. To get a better idea of what you can afford write out a detailed budget of how you spend your money over the course of a month (or better yet, the year). See what's leftover to give you a better idea of what you can comfortably afford for a mortgage payment.

You can also look at yourself as a lender would. Lenders generally follow the 43% rule, which means all your debts, including bills, loans and mortgage payments, shouldn't exceed 43% of your gross annual income.

2.Use your rent as a guide.

Home ownership comes with tax benefits that renters don't receive. These benefits generally allow you to afford a mortgage payment about one-third more than your current rent. Let's say you pay $1,000 in rent. A reasonable mortgage payment (that allows you to live your current lifestyle) would be about $1,333.

However, if you're struggling to pay your rent each month, a lower mortgage payment would be ideal. Something else to keep in mind: as a homeowner you'll have to foot the bill for things like property taxes and repairs. If you're already struggling just to pay the mortgage each month, these added expenses could cause you a lot of stress.

3.What's your down payment?

The higher your down payment, the lower your monthly payments will be. Saving up 20% of the home's cost for a down payment means you can avoid spending hundreds on private mortgage insurance each month. However, if home prices are on the rise, or lending rates are expected to go up, you could end up spending more on your home if you wait to reach your down payment goal. A mortgage professional can help you decide the right course of action for your situation.

Citywide Home Loans makes the loan process simple. Visit to see how much home you can afford and find a loan program that's right for you.