How Much Can I Borrow? Maximum Mortgage Calculator

Knowing how much mortgage you can borrow directly impacts the price range you can consider when searching for homes. This calculator estimates your maximum borrowing amount by factoring in your typical monthly income and monthly expenses.

How Much Mortgage Can I Qualify For? 

The most accurate way to see how much mortgage you qualify for is to get pre-qualified through multiple lenders. 

The general rule of thumb with mortgages is that you can borrow up to two and a half (2.5) times your annual gross income. 

Use our required income for a mortgage calculator to see how much annual income you need for a specific mortgage amount.

Lenders will calculate your maximum mortgage eligibility by weighing your income against your debts, the purchase price of the house, your down payment, the mortgage’s interest rate, and property taxes and insurance.

What Affects How Much I Can Borrow For a Mortgage? 

The most important factors to determine how much mortgage you qualify for are your debt-to-income ratio, loan-to-value ratio, and credit score

  • Debt-to-Income (DTI) Ratio: DTI is the ratio of your monthly debt payments to your monthly income. Lenders typically prefer a DTI below 43%, but specific requirements can vary by lender or mortgage type. When lenders consider how much mortgage you qualify for, they want to ensure that no more than 43% of your monthly income goes toward your debts.
  • Loan-To-Value (LTV) Ratio: LTV is the ratio of the loan amount to the appraised value of the property. Lenders often have maximum LTV limits, meaning you may need to provide a larger down payment for a higher-priced property.
  • Credit Score: Your credit score has more of an impact on the pricing of your loan than how much you qualify for. A higher credit score often leads to more favorable loan terms and a higher borrowing capacity. Lenders use your credit history to assess your creditworthiness.

How To Increase My Maximum Borrowing Amount

If you find that you have a mortgage value lower than what you would have liked after using the maximum mortgage calculator, do not fret.

Here are four ways you can increase how much mortgage you can borrow: 

  1. Improve your credit score: A higher credit score can qualify you for better interest rates and loan terms, significantly lowering your monthly payment and how much you have to pay in the long term.
  2. Reduce your debts: Paying down existing debts lowers your DTI, making you a more attractive borrower and qualifying you for a larger mortgage.
  3. Save for a larger down payment: A larger down payment reduces the loan amount needed, lowers your monthly payments, and may help you qualify for better loan terms. Saving diligently for a substantial down payment can improve your mortgage affordability.
  4. Consider co-borrowing or co-signing: Having a co-borrower or co-signer with a strong credit history and income can increase your borrowing capacity and improve your chances of qualifying for a larger mortgage.

How Much Should I Borrow For a Mortgage? 

Just because you qualify for a large mortgage doesn’t mean it’s the best option for you. 

More money towards your mortgage payment means less money for savings, investing, and entertainment. 

Most people don’t want to struggle to live comfortably or feel trapped by their monthly payments. Before committing to a house at the top of your affordability range, it’s crucial that you have a reliable budgeting strategy

The 28/36 Rule

A common budgeting strategy is the 28/36 rule. The rule says that you shouldn’t spend more than 28% of your total monthly income on your mortgage payment and that your debt obligations (including your monthly mortgage payment) shouldn’t exceed 36% of your total monthly income. 

What Kind of Mortgage is Right For Me?

To determine what kind of mortgage is right for you, you must realistically assess your financial situation. Some important questions you need to answer include:

  • Whether you can make a down payment: Certain mortgage types like VA and USDA do not require down payments, but you typically have to pay higher closing costs if you don’t provide one. This can make it tricky to determine where you’re getting the best deal. 

If you are able to make a down payment, consider how much you want to put down.

  • The length of time you would spend in the house: The 5-year rule says it takes five years on average to build home equity. If you’re not planning to be in the house for that long, consider whether it makes sense to dish out a bunch of money.
  • Your annual salary for the period of the mortgage: Do you expect to increase your salary during the life of your loan? If not, consider whether you’ll be comfortable living with your estimated monthly mortgage payment for the next 15 to 30 years.
  • Your credit history: Your credit likely has the biggest impact on how affordable your mortgage is. Credit score impacts your mortgage interest rates and can dictate whether or not you need to provide a down payment. 

The bottom line is that it pays to plan ahead. 

Shop around and make sure you get pre-qualified for the most accurate estimate of how much you can borrow. 

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