Mortgage – how much can I borrow?

To calculate how much mortgage you can afford, let’s consider some key elements, such as household income, monthly debts (for example, car loans and student loans), and the amount of savings available for an initial payment. As a home buyer, you need to know your monthly mortgage payments before making the purchase.

Although family income and regular monthly debts can be relatively stable, unexpected expenses and unplanned expenses can affect your savings.

A good rule of thumb is to have three months of payments, including housing payments and other monthly debts, in reserve. This will enable you to foot the mortgage bills in case of unforeseen circumstances.

To find out what your bank can offer you, you should try a home mortgage calculator on your bank’s website. It gives you a good hint of how much your mortgage will cost you. Try also calculators from other financial institutes to see what they can offer. How much mortgage can you afford? The answer to this question depends on many different factors.

How Does your DTI Affect Affordability?

Your bank’s unique method to calculate how much you can borrow is the DTI index, which compares your total monthly debts (for example, your mortgage payments, including insurance and property tax payments) with your monthly pre-tax income.

Depending on your credit score, you may be eligible for a higher DTI index, but housing costs typically shouldn’t exceed 28% of your monthly income.

For example, if your monthly mortgage payment, with tax and insurance, is $ 1,560 per month and you have a monthly income of $ 6,500 before tax, your DTI is 24%. (1560/6500 = 0.24)

You can also reverse the process to find out your home budget by multiplying your income by 0.24. This would allow for a $ 1,560 mortgage payment to achieve a DTI of 24% in the example above. That is, 6500 X 0.24 = 1,560.

How many mortgages Can You Pay with FHA Loan?

To calculate how much mortgage you can afford, I’ve assumed that you may get a conventional loan with less than a 20% down payment. However, if you prefer to pay lower amounts, say 3.5%, then an FHA loan is the right one for you.

Loans with support from the FHA have great advantages, especially if you have a low credit score. If this option is the best for you, then you can learn more about FHA online.

Factors that Determine How Much Mortgage You Can Afford

The key factors that determine mortgage affordability include:

  • Your monthly income
  • Cash reserves to cover entry and closing costs
  • Your monthly expenses
  • Your credit profile

Income: Money that you regularly receive, such as your salary or investment income. Your income helps establish a foundation for what you can afford each month.

Cash reserves: This is the amount of money you have available to make a payment and cover the closing costs. You can use your investments, savings, or other sources for this cause.

Debts and Expenses: This includes your monthly obligations, including car payments, student loans, credit cards, groceries, insurance, etc.

Credit Profile: Your credit score is important in determining the amount of money you can borrow from your bank and the mortgage interest rate you will earn.


Becoming a homeowner isn’t a journey without thorns. You have to plan, prepare adequately before starting this journey. I have outlined some important tips to help you get started. Good luck on this beautiful journey.