Home Loan Debt to Income Qualification Calculator

Just how much of a house can you afford, when you take into account your current financial standpoint? A garage, perhaps, a few rooms, or the whole first floor? Let this calculator give you a clear picture of what numbers come between you and your new home.

The variables that make up your expected financial involvement when buying a new house range from the percentage of the house's total cost that you will give as initial down payment and the homeowner's insurance expenses to the monthly standing debt that you may have already incurred. This figure can be summed up by the acronym PITI, the total mortgage payment that represents the combination of Principal, Interest, Taxes, and Insurance altogether.

Your monthly principal and interest payment is a figure that will likely stay steady throughout the life term of your loan. However, what will fluctuate is the amount of the individual principal and interest ratios in relation to the total P & I. For instance, in the first few years of a 30 year mortgage, your P & I bill will be mostly interest and very little principal. Recall that principal payments on their own are what reduce the amount that you owe your lender. A $40,000 loan might have 100 principal payments of $400 each to completely pay. But the interest is simply the APR of what the lender is charging you in return for allowing you to borrow the sum of money. As you get further into paying off a long term real estate mortgage, you will gradually begin to pay more and more pure principal and lesser amounts of interest. This representation of the mortgage payment structure is the best way to understand when and to what cause your money will be going to at any point in the loan repayment process.

Calculating Income to Payment and Debt to Income Ratios

At the bottom of the calculator you will find two numbers calculated for you as outputs which will be particularly useful when gauging just how much of your monthly take-home income will be dedicated towards bills, be it your house mortgage or your credit card debt. Your current income to payment ratio is the percentage of your monthly salary that will go towards real estate-related costs. It should not exceed 28%, and if it does you should consider refinancing your loan to reduce payments for a while, boosting your financial intake, or reducing your debt through alternative means. The second figure, the current debt to income ratio, ought not to exceed 36%. This percentile represents the maximum amount of your total income that will go to debt payments of any kind – including mortgage, car payments and credit card bills etc… – and totals to approximately one third of your income.

Your income to payment and debt to income ratios will ultimately determine whether you can afford to purchase the house in question whose numbers you will have plugged into the calculator. While many of the variables in your scenario will be unchangeables – such as the house cost, annual property taxes, insurance bills, and homeowner's association fees – keep in mind that many other fluctuating factors will have a major effect on your ability to go through with the purchase, such as your credit score. Whether or not you will qualify for a loan or not is largely determined by the viability of this score, as well as your current debt picture and a few intangibles, such as your relationship with your bank and other possible lenders with whom you have financial history.

How do You Calculate Front End Debt to Income Ratio?

The front-end DTI ratio compares your monthly income to the cost of owning a home. The ratio uses mortgage payments & other mandatory real estate expenses (principal, interest, property taxes & homeowner's insurance) and uses your income as the denominator.

Frontend DTI Formula

Frontend DTI = (mortgage payment + property taxes + homeowner's insurance) / monthly income

How do You Calculate Back End Debt to Income Ratio?

The back-end DTI ratio is similar to the front-end DTI ratio, except it also includes all your other mandatory monthly debt service payments for things like credit cards, student loans, and automotive loan payments.

Backend DTI Formula

Backend DTI = (monthly housing expenses + other mandatory monthly debt payment obligations) / monthly income

Debt to Income Limits by Mortgage Type

Borrowers with clean credit profiles and compensating factors can still obtain financing above the soft limits. Fannie Mae & Freddie Mac have adjusted their limits to allow people with student loan debt to still qualify with backend ratios as high as 50.

The soft limits by loan type are listed below.

Loan type	Front	Back
Conventional	28	36
FHA	31	43
VA	N/A	41
USDA	29	41

Mortgage Pricing Versus DTI

FHFA Maximum Conforming Loan Limits for 2022

On November 30, 2021 the FHFA updated conforming loan limits across the country. The baseline loan limits for Fannie Mae & Freddie Mac one-unit properties was increased from $548,250 to $647,200. The limit on HERA high-cost areas is 150% of the baseline — $970,800 for single-unit properties. You can view your local conforming limits here.

Prequalify for a Columbus Mortgage

Homebuyers and current homeowers living in Columbus can leverage the MRC lending network to find out which loans they will qualify for and get a free no-obligation quote on a Columbus home purchase or refinance.