How Much Should My Mortgage Payment Be Per Month?

The very first thing you need to do is to get pre-qualified by a mortgage professional.  In order to do that you will need to provide them with your personal information such as full name, social security number, date of birth, residences for the past 2 years, employment for the past 2 years, assets, 2 years of tax returns, 2 years of W-2s, and 2 months worth of bank statements. 

You need to understand that being pre-qualified for a certain amount doesn’t mean you can afford to spend that much or that you are comfortable spending that much.  It is best to keep you housing ratio at 31% or less.  In order to figure out what that number is you need to take your gross monthly income and multiple it by .31.  So for example if you make $60,000 per year before taxes you will divide that number by 12 making your income $5,000 per month and multiply $5,000 by .31 leaving you with not spending more than $1,550 per month on your mortgage. 

Keep in mind that everyone’s circumstances are different when it comes to how much you should spend per month on a mortgage payment.  If you don’t have any children you might be able to go a little higher than 31%, if you have 2 kids you might want to go below 31%, etc. 

You will also need to take into account what other debts you have too.  The main debts that we take into account are your monthly payments on credit cards, student loans, car payments, other installment debts, child support, etc. most of which are on your credit report.  It is best to keep your debt to income ratio including your mortgage and the debts just described at 40% or less.  That means your mortgage payment plus your debts divided by your gross income should be less than 40%. 

Do not plan your mortgage payment around a possible promotion or making more money.  If you receive variable income (i.e. not paid hourly or salary) I would suggest taking your past 3 years of income and dividing it by 36 months.  You want to be very careful when it comes to variable income.  I know as a commissioned based employee in the mortgage industry I was advised if I make $150,000 in a year to spend like I make $50,000 because the business is cyclical.  We all know that now and many of us, including myself, learned that the hard way.