Look at mouse cursor script not working properly

I've been trying to get the mouse cursor to register as a point in 3D space, so I can then have a character look at it. I don't want a mouse look system, where moving the mouse rotates the camera and the character, I want the character to actually look at the mouse cursor. I've tried casting a plane from the character and casting a ray and using where it intersects but that only works in a 2D environment with a static camera.

So next I figure a combination of ScreenPointToRay and Input.mousePosition is how to accomplish this. This is what I tried:

 RaycastHit hit;
             if(Physics.Raycast(Camera.main.ScreenPointToRay(Input.mousePosition), out hit)){
                 transform.LookAt(hit.point);
 }

It kind of works. The character will only look at the mouse cursor if its under a certain height on the screen. Going above a certain height and he will ignore it. Also, if the mouse cursor goes on top of him, instead of following it in a forward direction, he'll actually turn around to look at it. What am I still missing?