How to Figure 31 Percent of My Mortgage to Income
A 31 percent mortgage to income percentage is commonly used by financial institutions and government programs as the standard for how much mortgage expense is affordable for homeowners. Whether you are considering a loan modification on an existing mortgage or entering a new mortgage, learning how to figure 31 percent of your mortgage to income is a valuable skill. The process boils down to knowing which mortgage and income figures are pertinent and applying mathematics.
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Instructions
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Total your gross income from your W-2 or pay stubs. If you are using pay stubs, and your income varies from paycheck to paycheck, take your four most current pay stubs and average the gross pay amounts by adding them together and dividing by four.
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Convert your gross income to a monthly figure (unless you are paid monthly). If you are using W-2 forms, divide the total annual gross income by 12. If you are using pay stubs, convert to monthly income based on how often you are paid. If you are paid bimonthly (twice per month), multiply the gross pay by 2. If you are paid biweekly (every two weeks), multiply the gross pay by 26 and divide the result by 12. If you are paid weekly, multiply the gross pay by 52 and divide by 12. If you are paid monthly, use the gross pay.
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Repeat the process of determining monthly income for all homeowners listed on the mortgage, and add the results together to determine your household's gross monthly income.
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Use a calculator to determine 31 percent of your monthly income. Multiply your total monthly income by 0.31, giving you the amount that is equal to 31 percent of your total monthly income.
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Compare 31 percent of your monthly income to your mortgage expenses (or prospective mortgage expenses). Include principal, interest, and tax escrow payments in your monthly mortgage expenses. If 31 percent of your monthly income is greater than your mortgage expenses, the expenses are under the 31 percent mark. If 31 percent of your income is less than your mortgage expenses, you are over the 31 percent mark.
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Tips & Warnings
Certain types of income, such as bonuses and some kinds of commissions, may not need to be included when calculating your total income. Consult your lender or mortgage broker if you have these kinds of irregular income.
To determine your mortgage to income percentage in general, divide your monthly mortgage expenses by your monthly income and multiply the result by 100. The result is your mortgage to income percentage.
Always contact your lender for specific information.
References
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