How much can I afford on a mortgage?
When first considering purchasing a home, one of your first and perhaps most difficult questions may be “how much can I afford on a mortgage?” The answer to this question is really a calculation of several factors.
- Household income
- Monthly debts (loans, credit card debt, etc.)
What is the Debt-To-Income Ratio?
Also known as the DTI, your debt-to-income ratio is a comparison of your gross (pre-tax) monthly income and your monthly expenses.
It is calculated by:
- First, adding up your bills, which can include:
- Current rent or current mortgage
- Loan payments
- Credit card
- Other items owed: other debt, child support, etc.
- Second, take the total from the first step and divide it by your before-tax-income.
- Third, whatever your calculation is, you’ll need to put that in the from of a percentage.
What does this mean for my mortgage:
While your credit score could get you qualified at a higher ratio, your mortgage and related costs (taxes and insurance) shouldn’t be higher than 28%.
Calculate how much you can afford
Our simple, easy-to-use mortgage calculator can tell you how much you can afford on a mortgage!