How can you ensure you qualify for a mortgage? A big part of qualifying for a mortgage is how much income you make. Use our mortgage required income calculator to get a better understanding of what income you’ll need to qualify for a certain loan amount.
Mortgage Required Income Calculator
How to Use the Mortgage Required Income Calculator
The best way to think about how much home you can afford is to consider what your maximum monthly mortgage can be.
As a general rule of thumb, lenders limit a mortgage payment at 28 percent of your gross — that is after-tax — monthly income.
So, if you simply multiply your annual income by 0.28, then divide by 12, you’ll find your maximum monthly mortgage payment.
Glossary of terms
- Desired mortgage amount
- Monthly housing expenses
- Monthly liabilities
- Monthly housing payment
- Maximum principle and interest
- Start interest rates
- The term in years
- Real estate taxes
- Hazard insurance
- Association dues or fees
- Monthly PMI
Desired mortgage amount
The amount a borrower agrees to repay, as set forth in the loan contract.
Monthly housing expenses
Monthly outlay that includes monthly mortgage payment plus additional costs like property taxes and homeowners insurance, as well as other potentially applicable costs like mortgage insurance, flood insurance, homeowners association or co-op fees, or special tax assessments.
Amounts of money that you owe to another person or entity. Liabilities can be short-term like credit card payments or longer-term like car loans or mortgages.
Monthly housing payment
A mortgage payment that includes PITI (principal, interest, taxes, insurance).
Maximum principle and interest
Calculated by subtracting your monthly taxes and insurance from your monthly PITI payment to calculate the maximum principle and interest (PI) payment to determine the mortgage amount that you could qualify for.
Start interest rates
The introductory interest rate, also known as the teaser rate or start rate, on an adjustable or floating-rate loan. It is usually lower than most other interest rates and often stays consistent within a specific time frame only.
The term in years
Mortgage terms aren’t limited to 30 and 15 years. Plenty of buyers prefer other options like 10-year, 20-year, 25-year, 40-year, and even five-year terms, based on their monthly income and budgetary goals.
Real estate taxes
Charged on immovable property, including land and structures that are permanently attached to the ground, such as a house or building. When you buy a home, you must pay real estate taxes, also known as property taxes, directly to your local tax assessor or indirectly as part of your monthly mortgage payment.
Insurance coverage for the structure of a home.
Association dues or fees
Required by some condominiums and neighborhoods as part of a homeowners’ association (HOA). Dues are typically paid directly to the homeowners’ association (HOA) and are not included in the payment you make to your mortgage servicer.
Stands for private mortgage insurance, which is a type of mortgage insurance you could be required to pay for if you have a conventional loan. PMI is typically required when you obtain a conventional mortgage and make a down payment of less than 20 percent of a home’s purchase price.
Commonly Asked Questions
For most buyers, obtaining a mortgage and buying a home is the largest financial undertaking they will complete in their lifetime. Homes appreciate in value and are typically considered a sound investment for most applicants.
But committing to repay a large amount of money can be confusing. Let’s look at the most commonly asked questions that pop up during the process.
Lenders consider two main points when reviewing loan applications: the likelihood of repaying the loan (typically determined by a credit score) and the ability to do so (typically determined by proof of income).
Nerdwallet.com explains that mortgage income verification, even if they have impeccable credit, borrowers still must prove their income is enough to cover monthly mortgage paymen
In conclusion, the primary factors for mortgage approval are credit score, income, existing debt, and down payment. As a savvy consumer, you can run scenarios with various inputs to find the right mortgage lending solution for you.
Once you procure a mortgage, be sure to pay your payments on time and include extra principal payments as available. These actions will ensure you are able to refinance should mortgage rates become more desirable.
Home-ownership is a journey and a dream for most Americans. Use the research we’ve compiled to make the most of your adventure toward owning a home.
The information provided by these calculators is for illustrative purposes only. Results do not reflect all loan programs and are subject to specific loan limits. Qualification, rates and payments will vary based on timing and individual circumstances. This is not a commitment to pre-approve or lend. Be sure to consult a financial professional prior to relying on the results. The calculated results are intended for illustrative purposes only and accuracy is not guaranteed.