What percentage of your monthly income should go toward your mortgage?

Answer 1

Rule of thumb currently promoted is that you should never spend more than 1/3 of your gross income. 33.3%. But you should be aware that this is far higher than the historic average. Up until 20 years or so ago, the rule of thumb was 25%, and many critics point to this change as one reason so many Americans are over-leveraged.

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The change was made in 1999 under the direction of then President Clinton, the Gramm-Leach-Bliley Act was enacted and signed by Clinton. Prior to this act only 36% of your income could be leveraged by creditors, and only 28% by mortgagers.

Afterwards 33.3% could be mortgage debt and 42% total leverage. These relaxed standards and other parts of the act which allowed banks to diversify their loans and investments, and eliminated the 18% maximum interest rate, (put in place after the "stagflation" of the late 1970s) which led to run away credit and interest rates contributing to an overburdened banking and credit crisis, where debtors no longer were able to cover inflating interest rates, which could triple overnight without warning.