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One way to decide how much of your income should go toward your mortgage is to use the 28/36 rule. According to this rule, your **mortgage payment shouldn't be more than 28% of your monthly pre-tax income and 36% of your total debt**. This is also known as the debt-to-income (DTI) ratio.

According to this rule, a household should spend a maximum of 28% of its gross monthly income on total housing expenses and **no more than 36% on total debt service**, including housing and other debt such as car loans and credit cards.

- No more than 28 percent of your gross monthly income should go to monthly housing costs. ...
- No more than 36 percent of your gross monthly income should be spent on total debt and loan payments.

Calculating gross monthly income if you're paid hourly

First, to find your yearly pay, multiply your hourly wage by the number of hours you work each week and then multiply the total by 52. Now that you know your annual gross income, **divide it by 12** to find the monthly amount.

The 28% rule states that you should spend 28% or less of your monthly gross income on your mortgage payment (e.g. principal, interest, taxes and insurance). To determine how much you can afford using this rule, **multiply your monthly gross income by 28%**.

Now we can see that our fraction is 77.777777777778/100, which means that 28/36 as a percentage is **77.7778%**.

Applying the 28/36 rule as a guide, you'd need a gross monthly income of at least $4,789 because $1,341 (your total housing expenses) is 28 percent of $4,789. That means if you make approximately **$57,471 per year**, you would meet the front end ratio.

- Look up the amount listed on the paycheck stub before anything is subtracted. ...
- Multiply this by 2.17 to find your gross monthly income if you are paid every two weeks. ...
- Multiply your base pay by 4.35 to calculate your gross monthly income if you are paid weekly.

It's the amount of money you bring in before your deductions and taxes. Therefore, all you need to do to determine your gross monthly income is **divide the total salary you receive per year by 12**.

- a: $100,000, the amount of the loan.
- r: 0.005 (6% annual rate—expressed as 0.06—divided by 12 monthly payments per year)
- n: 360 (12 monthly payments per year times 30 years)

So if you earn $70,000 a year, you should be able to spend **at least $1,692 a month** — and up to $2,391 a month — in the form of either rent or mortgage payments.

Some experts suggest that the total amount you pay towards your mortgage should **not exceed 28% of your gross** (rather than net) income. And you should make sure that you don't go over 36% of gross income for the total amount you spend on all borrowing, including mortgage.

TL;DR: You should try to spend **no more than 35% of your gross (pre-tax) income** on your mortgage. A more conservative recommendation is no more than 25% of your gross income.

Bankrate.com and other financial websites recommend keeping your debt-to-income ratio **below 36 percent**. That means that your monthly debt should consume less than 36 percent of your monthly income.

Most experts recommend that you shouldn't spend **more than 30 percent of your gross monthly income on rent**. Your total living expenses (rent, utilities, groceries and other essentials) should be less than 50 percent of your net monthly household income.

How Much House Can I Afford Based on My Salary? To calculate how much house you can afford, use the **25% rule**—never spend more than 25% of your monthly take-home pay (after tax) on monthly mortgage payments.

$1,200 after tax is **$1,200 NET salary (annually)** based on 2022 tax year calculation. $1,200 after tax breaks down into $100.00 monthly, $23.00 weekly, $4.60 daily, $0.58 hourly NET salary if you're working 40 hours per week.

- Step 1: take the total price and divide it by one plus the tax rate.
- Step 2: multiply the result from step one by the tax rate to get the dollars of tax.
- Step 3: subtract the dollars of tax from step 2 from the total price.
- Pre-Tax Price = TP – [(TP / (1 + r) x r]
- TP = Total Price.

Figure out the take-home pay by subtracting all the calculated deductions from the gross pay, or using this formula: **Net pay = Gross pay - Deductions** (FICA tax; federal, state and local taxes; and health insurance premiums).

To calculate your total salary, **obtain your taxable wages from either Box 3 or Box 5** and add the amount to your nontaxable wages and pretax deductions which are excluded from FICA taxes.

**GTI = TI + deductions** under Section 80

So, GTI is the total of all the heads of income while TI is GTI minus the deductions. To calculate GTI, you add the following: Income from salary: This includes the earning from employment.

For individuals, gross income is **all the money you earn before taxes and other deductions are subtracted**. Your earned income can come in many forms: salary, bonuses, tips, hourly wages, rental income, dividends from stocks and bonds, and savings account interest.

Most mortgage lenders use an income **multiple of 4-4.5 times your salary**, some offer a 5 times salary mortgage and a few will use 6 times salary, under the right circumstances to work out how much mortgage you can afford.

If you make $50,000 a year, your total yearly housing costs should ideally be no more than $14,000, or $1,167 a month. If you make $120,000 a year, you can go **up to $33,600 a year**, or $2,800 a month—as long as your other debts don't push you beyond the 36 percent mark.

The golden rule in determining how much home you can afford is that your **monthly mortgage payment should not exceed 28% of your gross monthly income** (your income before taxes are taken out). For example, if you and your spouse have a combined annual income of $80,000, your mortgage payment should not exceed $1,866.