One of the first questions most homebuyers ask is: “How much house can I actually afford?” While many factors affect mortgage eligibility, your income is one of the biggest drivers in determining your maximum mortgage loan amount.
At Advisors Mortgage, we help buyers understand how lenders calculate affordability so you can shop with confidence and avoid surprises during the loan process. Let’s break it down.
Why Income Matters in Mortgage Qualification
When you apply for a mortgage, lenders want to ensure you can comfortably manage your monthly payments. Your income helps determine how much you can borrow, what monthly payment fits your budget, and whether you meet lender guidelines.
But it’s not just about how much you earn — it’s also about how much of your income goes toward existing debts.
The Key Metric: Debt-to-Income Ratio (DTI)
The most important formula lenders use is your Debt-to-Income Ratio, or DTI. This measures how much of your monthly income is already committed to debt payments.
DTI = Total Monthly Debt Payments ÷ Gross Monthly Income
Debt payments may include car loans, student loans, credit card minimums, personal loans, and other mortgages.
Most lenders prefer a DTI below 36% for ideal qualification, though some loan programs allow up to 43–50%.
Step-by-Step: Estimating Your Maximum Mortgage Payment
Step 1: Calculate Your Gross Monthly Income
Gross income is your income before taxes. For example, an annual salary of $90,000 equals a gross monthly income of $7,500.
Step 2: Estimate Your Maximum Allowable Debt
If your lender allows a 43% DTI: $7,500 × 0.43 = $3,225. That means your total monthly debt (including your mortgage) should not exceed $3,225.
Step 3: Subtract Your Existing Monthly Debts
Let’s say you have a $400 car payment, $300 student loan, and $100 in credit cards — totaling $800. $3,225 – $800 = $2,425. So your estimated maximum monthly mortgage payment may be around $2,425.
What Counts in a Mortgage Payment?
Your mortgage payment is more than just the loan itself. Lenders typically include principal and interest, property taxes, homeowners insurance, mortgage insurance (if applicable), and HOA fees (if applicable). This is known as PITI.
Turning Monthly Payment Into Loan Amount
Once you know your maximum monthly payment, the loan amount depends on the interest rate, loan term (30-year vs 15-year), down payment, and taxes and insurance costs.
For example, a $2,400 monthly payment could translate to around $350,000 at one interest rate, closer to $400,000 at another, or less if taxes or insurance are high. That’s why working with a mortgage expert is essential.
Other Factors That Affect Your Max Loan Amount
Even with strong income, lenders also consider:
- Credit Score: Higher credit scores can unlock better rates and higher approvals.
- Down Payment: A larger down payment lowers your loan amount and monthly payment.
- Loan Type: Different programs have different flexibility — conventional loans, FHA loans, VA loans, and jumbo loans.
- Employment History: Stable and consistent income is key, especially for self-employed borrowers.
Get a Personalized Mortgage Calculation
Online calculators can provide a general estimate, but every borrower’s situation is unique. At Advisors Mortgage, we offer customized pre-approvals that take into account your income, your debts, your goals, and current mortgage rates — so you can confidently determine your true price range before making an offer.
Ready to Find Out How Much You Can Borrow?
Let’s run the numbers together. Our loan advisors are here to help you understand your buying power and explore the best loan options available.
Contact Advisors Mortgage today to get started with a free mortgage consultation or pre-approval.
By: Jon Iacono