• An affordable home mortgage often takes 28 percent of your monthly income.house image by Brett Bouwer from Fotolia.com
  
  

Standard Debt-to-Income Ratio

• The standard debt-to-income ratio is the amount of money that you can afford to put toward a mortgage payment each month before taxes. This payment will also include your taxes and insurance on the home. The amount you spend should not exceed 28 percent of your income. For someone who makes $3,000 a month, the calculation would be 280 (28 percent of 1,000) multiplied by 3. This amount comes to $840. Yearly, the homeowner would expect to pay $10,080 toward the mortgage.
  
  

Total Debt-to-Income Ratio

• With the total debt-to-income ratio, all of your debt should not exceed 36 percent of your income each month. These debts would include the mortgage, bills, student loans and any other payment obligations. For someone who makes $3,000 a month, the calculation would be 360 multiplied by 3, or $1,080. Yearly, this amount would be $12,960 paid toward the total debt obligations, including a mortgage.
  
  

Bottom Line

• Many lending companies base an affordable mortgage on a standard debt-to-income scale or a total debt-to-income scale. Either of these methods can be affordable, and the plan chosen will depend on the lending company and the financial circumstances of the person borrowing the money. If the borrower can afford a higher monthly payment based on a total debt-to-income ratio instead of the standard debt-to-income ratio, that could mean a larger mortgage.