Our Home Affordability Calculator can help you decide.
The mortgage you can afford depends on many factors, including your total monthly payment, income, debt obligations, and down payment amount. Two ratios are commonly used by lenders to determine whether a mortgage applicant can afford a mortgage loan:
The housing ratio, or "front-end ratio", measures the amount of your total monthly housing payment (including principal, interest, property taxes, homeowners insurance, mortgage insurance, and HOA fees) as a percentage of your monthly gross income. Lenders typically prefer to see a housing ratio of 28% or less.
The debt-to-income (DTI) ratio, or "back-end ratio", measures the amount of total monthly payments you are required to make for all outstanding debt as a percentage of your monthly income. Generally your DTI ratio should be 36% or lower to qualify for a mortgage.
Loan approvals are possible with housing and DTI ratios that are higher than the conventional 28% and 36% limits. Government loan programs such as FHA, VA, and USDA allow for higher ratios. Also, mortgage applicants with elevated ratios may still be approved based on strengths in other aspects of the application, e.g. large down payment, exceptionally high credit score, or large reserves in bank accounts and investments.
