Mortgage Calculator: How Much Can I Borrow?

Table of Content

• Debt to Income Ratio (DTI)
• Can You Borrow with Your Current Income?
• Other types of income that count toward mortgage qualifying
• Wells Fargo Car Loan Rates

Generally, they will look for a borrower with a DTI of around 43-55%. If your DTI is below 43% then you have a better chance of qualifying for a loan. A mortgage rate is the rate of interest charged on a mortgage.

Keep in mind, too, that many down payment assistance programs have income limits. Typically, your income cannot exceed 100% to 115% of the median area income. You can expect lenders to look at any checking and savings accounts, certificates of deposit , stocks, bonds, mutual funds, and retirement accounts like 401s and Roth IRAs. You’ll need a FICO score of at least 620 to be eligible for a conventional home loan backed by Fannie Mae.

Debt to Income Ratio (DTI)

Using a mortgage calculator is a good resource to budget these costs. Again, this all comes down to your own personal level of affordability, and how comfortable you are with being able to afford the maximum amount. It’s not just what’s built into your monthly payment — such as insurance, taxes and the rest — but the other having-a-home expenses, like structural upkeep, new furniture, or yard maintenance equipment. For example, if you make $3,000 a month ($36,000 a year), you can afford a mortgage with a monthly payment no higher than $1,080 ($3,000 x 0.36). Your total household expense should not exceed $1,290 a month ($3,000 x 0.43).

According to 2020 data fromZillow Research, record low mortgage rates have helped to boost affordability for potential homeowners. The table below shows the top 10 most affordable markets to live in for December 2020 and is based on a typical home value of no more than $300,000 . The market and share of income spent on a mortgage may fluctuate based on the current mortgage rate, the typical local homeowner’s income and the typical local home value.

Can You Borrow with Your Current Income?

Anna Baluch has written hundreds of articles on personal and student loans, mortgages, debt relief, budgeting, banking, and more. She's been published on well-known finance sites like LendingTree, Credit Karma, Experian, Rocket Mortgage, Policygenius, U.S. News & World Report, and American Express. Most homebuyers generally choose conventional loans, which are not directly financed by the government. Conventional loans are usually packaged into mortgage-backed securities that are guaranteed by Fannie Mae and Freddie Mac. These are available through private lenders such as banks, credit unions, and mortgage companies.

Though most lenders only ask for a verbal confirmation, others might request for an email verification. Furthermore, expect lenders to perform a hard credit check on your credit report, which means it can impact your credit score. For example, if you make $3,000 a month , you can afford a mortgage with a monthly payment no higher than $1,080 . Your total household expense should not exceed $1,290 a month .

Other types of income that count toward mortgage qualifying

This is the percentage of your gross monthly income — your pre-tax income before deductions — that goes toward minimum debt payments. Your DTI ratio tells lenders the monthly mortgage payment you can afford. When it comes to calculating affordability, your income, debts and down payment are primary factors. How much house you can afford is also dependent on the interest rate you get, because alower interest ratecould significantly lower your monthly mortgage payment. While your personal savings goals or spending habits can impact your affordability,getting pre-qualified for a home loancan help you determine a sensible housing budget. One of the first things to do is itemize all of your debts, including credit card bills, personal loans, and car payments.

We believe everyone should be able to make financial decisions with confidence. Zillow, Inc. holds real estate brokerage licenses in multiple states. Zillow , Inc. holds real estate brokerage licenses in multiple provinces.

Types of Government-backed Mortgages

In fact, you’ll be paying for homeowner’s insurance before you even close on the property. Your lender will require that you pay your first year’s insurance premium when you close on your home loan, and it will be included in your monthly mortgage payment. A mortgage calculator is a smart first step to buying a home because it breaks down a home loan into monthly house payments, based on a property’s price, current interest rates, and other factors. This can help you figure out if a mortgage fits in your budget, and how much house you can afford comfortably.

For purposes of calculating your debt-to-income ratio, lenders also take into account costs that are billed as part of your monthly mortgage statement, in addition to the loan payment itself. These include property taxes, homeowner’s insurance and, if applicable, mortgage insurance and condominium or homeowner’s association fees. Lenders look for borrowers who are lower risk, so they set these requirements for home equity loans.

Debt-to-Income Ratio

According to ClosingCorp, in 2019, the average national closing cost for a single-family home was $5,749. This is a considerable sum, so don’t forget to include it when you’re budgeting for your mortgage. In June 2020, the Consumer Financial Protection Bureau announced steps to address GSE patches, suggesting that the DTI ratio can be removed as a primary requirement to qualify for mortgages. To take its place, lenders would have to rely on loan pricing information as the main basis for mortgage approval.

You can gauge how much of a mortgage loan you qualify based on your income with our Mortgage Required Income Calculator. Your mortgage payment is a combination of principal and interest payments. Your primary mortgage provider will detail how much you’ve paid in principal on your mortgage statements. In addition to the down payment, you will also need cash reserves on hand to cover closing costs and repairs that come up during the home inspection process.

Types of Mortgage Loans for Buyers and Refinancers

These calculations can, however, be slightly tricky because some of the deductions on your tax return are added back into your net income like depreciation, depletion and one-time expenses/repairs. If you’re hoping to buy a home, weeks or months could pass before you find a house and negotiate your way to an accepted offer. But mortgage pre-approval does not last indefinitely, since your financial circumstances could change by the time you close your real estate deal.

For your down payment and closing costs, you’ve saved $55,000. If your debt payments are less than 36 percent of your pre-tax income, you're typically in good shape. The total of your monthly debt payments divided by your gross monthly income, which is shown as a percentage.

The most widely used credit rating system ins FICO or the Fair Isaac Corporation, which is used by 90% of lenders in the U.S. It also takes data from three major credit reporting bureaus to determine consumers’ credit ratings. Another credit rating classification system used by lenders is VantageScore, which has a slightly different scoring system from FICO. Aspiring homeowners normally undergo two qualifying steps before they are approved for a mortgage.