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The most common rule for housing payments states that you shouldn't spend more than 28% of your **gross income** on your housing payment, and this should account for every element of your home loan (e.g., principal, interest, taxes, and insurance).

The traditional rule of thumb has been: You shouldn't apply more than 28 percent of your monthly gross income to your mortgage payment.**No more than 36 percent of that monthly gross should go toward your debts in general**: mortgage, plus other obligations like car or student loans.

A popular standard for budgeting rent is to follow the 30% rule, where you spend a maximum of 30% of your monthly income before taxes (your **gross income**) on your rent. This has been a rule of thumb since 1981, when the government found that people who spent over 30% of their income on housing were "cost-burdened."

Lenders use your DTI ratio and your **gross income** to determine how much you can afford per month. To determine your DTI ratio, take the sum of all your monthly debts such as revolving and installment debt payments, divide this figure by your gross monthly income and multiply by 100.

You may have heard it—the old rule that says, “**Homeowners shouldn't spend more than 30% of their gross monthly income on housing**.” The idea is to ensure they still have 70% of their income to spend on other expenses. The intent is good. But is it realistic today? That depends on your financial situation.

If I Make $70,000 A Year What Mortgage Can I Afford? You can afford a home price **up to $285,000** with a mortgage of $279,838. This assumes a 3.5% down FHA loan at 7%, a base loan amount of $275,025 plus the FHA upfront mortgage insurance premium of 1.75%, low debts, good credit, and a total debt-to-income ratio of 50%.

You may be able to afford a **$470,000 home** with a mortgage of $446,500 and a total monthly PITI payment of $3,600 which is 36% of your monthly gross income. Your maximum loan amount depends on your debts, interest rate, property taxes, homeowner's insurance, HOA dues, loan program, and payment comfort level.

The IRS also requires you to enter your prior year's AGI when you e-file if you've prepared your own taxes. You'll find your AGI on last year's IRS Form 1040, line 8B. AGI is the figure lenders are looking for when they ask for your income on a mortgage application.

According to the 28/36 rule, you or your household should spend no more than 28% of your **gross monthly income** on total housing costs. You should also avoid paying more than 36% of your gross monthly income toward any debt (including your mortgage payment).

If I Make $90,000 A Year What Mortgage Can I Afford? You can afford a home price **up to $370,000** with a mortgage of $363,298. This assumes a 3.5% down FHA loan at 7%, financed 1.75% upfront FHA mortgage insurance fee, low debts, good credit, and a total debt-to-income ratio of 50%.

Key Takeaways. The 50/30/20 budget rule states that **you should spend up to 50% of your after-tax income** on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).

Budget 20% for savings

In the 50/30/20 rule, **the remaining 20% of your after-tax income should go toward your savings**, which is used for heftier long-term goals. You can save for things you want or need, and you might use more than one savings account.

The 25% rule allows borrowers to use their net income in calculations, which may be easier for borrowers who are unsure about their gross monthly income. This rule states that **no more than 25% of your post-tax income should go toward housing costs**.

That's because your budget is influenced by a variety of factors, like your mortgage rate, down payment, loan length, and so on. Here's how to figure out how much you can spend. An individual earning $60,000 a year may buy a home worth ranging from **$180,000 to over $300,000**.

35% / 45% rule

Essentially, this housing payment rule says **your housing payment shouldn't be more than 35% of your gross income or more than 45% of your net income after you pay taxes**.

The 50-30-20 rule **recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings**. The savings category also includes money you will need to realize your future goals. Let's take a closer look at each category.

If you really want to keep your personal finances easy to manage **don't buy a house for more than three times(3X) your income**. If your household income is $120,000 then you shouldn't be buying a house for more than a $360,000 list price.

2% Rule. The 2% rule is the same as the 1% rule – it just uses a different number. The 2% rule states that **the monthly rent for an investment property should be equal to or no less than 2% of the purchase price**. Here's an example of the 2% rule for a home with the purchase price of $150,000: $150,000 x 0.02 = $3,000.

FHA loans are less strict, requiring a **31/43 ratio**. For these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything that constitutes the full payment.

That's because net income represents the amount of money you have available to spend from each paycheck. If you use gross income instead, **you might end up spending money that's already been allocated elsewhere**. But gross income can be a more accurate figure if you use a budgeting tool that calls for it.

Your gross income: **The total amount of your earnings before taxes and deductions are taken out**. In addition to your monthly income from wages earned, this can include social security income, rental property income, spousal support, or other non-taxable sources of income.

On a salary of $36,000 per year, you can afford a house priced around **$100,000-$110,000** with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.

That monthly payment comes to $36,000 annually. Applying the 28/36 rule, which states that you shouldn't spend more than around a third of your income on housing, multiply $36,000 by three and you get $108,000. So to afford a $500K house you'd have to make **at least $108,000 per year**.

To afford a $500,000 house, **you need to make a minimum of $91,008 a year** — and probably more to make sure you're not house-poor and can afford day-to-day expenses, maintenance and other debt, like student loans or car payments. One good guideline to follow is not to spend more than 28 percent of your income on housing.