How it works
Lenders look at two ratios. The housing ratio compares your monthly housing cost — mortgage payment plus property tax and insurance — with your gross monthly income; 28% is a common ceiling. The total debt ratio adds your car, card and student loan payments; 36% is the classic limit, though some loans allow up to 43% or more.
Housing budget = min(income × 28%, income × 36% − other debts)
- income — gross monthly income
- other debts — monthly payments on all other loans and cards
The calculator then works backwards from that budget: it finds the loan whose monthly payment, plus tax and insurance on the whole price, exactly fits. Adding your down payment gives the price. Being approved for a price does not mean it is comfortable — leave room for maintenance, savings and the unexpected.