When You Know Your Annual Income
How Much Can I Borrow?
The simple answer is that you can generally expect to borrow around 4 times your annual income.
Click here to find out: <What should my annual income be to buy a home at a certain price?>
Use This Calculator
Affordability Calculator
Click the link above to open the calculator in a new window. Please fill it out while referring to the explanations on this current page.
- Annual Income: Enter your total annual income.
- Monthly Debts: Enter your current fixed monthly expenses. This includes minimum credit card payments, auto loans, student loans, etc. Do not include rent or utilities. If these debt amounts are small, they won’t significantly affect your loan limit; however, if they total several thousand dollars, it can drastically reduce the amount you can borrow.
- Down Payment: Enter your down payment amount. A minimum of 20% or 30% of the home purchase price is highly recommended.
- Debt-to-Income (DTI): DTI is the ratio of all your debts (including the new mortgage payment) to your gross income. Simply enter 40%.
- Interest Rate: Enter the interest rate. Click here to check today’s current rates and enter that percentage.
- Loan Term: The standard option is typically 30 years (which equals 360 months).
- Include PMI: PMI stands for Private Mortgage Insurance, which is required if your down payment is less than 20%. If you put down 20% or more, you do not pay this. Check this box only if your down payment is under 20%.
- Include Taxes/Insurance: This asks whether to include property taxes and home insurance. Be sure to select this option to get an accurate calculation.
- Property Tax: The calculation can be complicated, so you can just leave it at the default value.
- Home Insurance: You will need to contact an insurance company directly to verify this exact cost. As a rough estimate, a 2-bedroom condo/apartment is usually around $1,500 per year.
- HOA Dues: This applies only to condos and represents the monthly condo management/maintenance fee. If you are not buying a condo, enter 0.
Once you enter all the fields, the results will automatically generate on the right side.
The amount shown under “You can afford a house up to $000,000” is the maximum home price you can purchase based on your annual income.
Subtract your Down Payment amount from this total house price, and that final number is the total loan amount you can receive.