This calculator and accompanying financial information are regularly reviewed to ensure accuracy and adherence to modern lending standards.
Use the Mortgage Qualification Calculator to quickly estimate the maximum monthly housing payment you can qualify for based on key financial metrics like your gross income and existing monthly debts. This tool is based on the commonly used Debt-to-Income (DTI) ratio.
Mortgage Qualification Calculator
Calculation Result:
Calculation Details
Mortgage Qualification Calculator Formula
Total DTI = (Monthly Housing Payment + Total Monthly Debts) / Gross Monthly Income
$$ \text{DTI} = \frac{\text{PITI} + \text{TMD}}{\text{GAI}/12} $$
Formula Source: CFPB Debt-to-Income Ratio Explained, FDIC Consumer Assistance Topic: MortgagesVariables
The calculation relies on the following key variables, one of which can be solved for if the others are known:
- Gross Annual Income (GAI): Your total income before taxes and deductions. This is divided by 12 to find your monthly income (MI).
- Total Monthly Debts (TMD): All recurring monthly payments (car loans, credit cards, student loans) that will last for 10 or more months.
- Max Monthly Housing Payment (PITI): The proposed or estimated monthly cost of Principal, Interest, Taxes, and Insurance.
- Max Back-End DTI Limit: The maximum Debt-to-Income ratio your lender accepts (typically 36% for conventional loans).
Related Calculators
Explore these related financial tools to assist with your home buying process:
- Max Home Price Calculator
- Mortgage Pre-Approval Cost Estimator
- PITI Payment Breakdown Tool
- Refinance Savings Calculator
What is Mortgage Qualification Calculator?
A mortgage qualification calculator is an essential tool that helps prospective homebuyers determine their borrowing capacity based on a lender’s criteria. Lenders primarily use the **Debt-to-Income (DTI) ratio** to assess a borrower’s ability to manage monthly payments and repay a loan. This calculator utilizes the “Back-End” DTI ratio, which includes all major monthly obligations.
The Back-End DTI is calculated by dividing your total monthly debt payments (including the proposed mortgage payment) by your gross monthly income. For most conventional mortgages, lenders look for a DTI of 36% or less, though this can sometimes stretch up to 43% or 50% depending on the loan type and other factors like credit score and down payment size.
By allowing you to solve for a missing variable—whether it’s the maximum affordable payment, the necessary income, or the DTI—this tool provides flexibility for scenario planning. For example, you can input your desired payment and debt to see the minimum annual income required.
How to Calculate Mortgage Qualification (Example)
Let’s find the **Max Monthly Housing Payment (PITI)** a borrower qualifies for, assuming a standard 36% DTI limit.
- Identify Known Variables: Gross Annual Income (GAI) = $120,000; Total Monthly Debts (TMD) = $800; Max DTI Limit = 36% (0.36).
- Calculate Monthly Income (MI): $120,000 / 12 = $10,000.
- Calculate Max Total Monthly Payment (MTMP): $10,000 (MI) × 0.36 (DTI Limit) = $3,600.
- Solve for Max PITI: Subtract existing debts from the Max Total Payment: $3,600 (MTMP) – $800 (TMD) = $2,800.
- Result: The maximum qualified monthly housing payment (PITI) is $2,800.
Frequently Asked Questions (FAQ)
What is the difference between Front-End and Back-End DTI?
The Front-End DTI (Housing Ratio) only includes the proposed mortgage payment (PITI) divided by gross monthly income (typically limited to 28%). The Back-End DTI (Total DTI) includes PITI *plus* all other monthly debts (typically limited to 36%). Lenders usually focus on the lower of the two qualification limits.
Why is Gross Annual Income used instead of Net Income?
Lenders use Gross Annual Income (pre-tax) because it provides a uniform standard for comparison across all applicants, regardless of individual tax situations. It represents the full capacity of a borrower’s earnings.
What counts as a “Total Monthly Debt” (TMD)?
TMD includes any recurring debt obligation that will last for 10 months or more, such as minimum credit card payments, student loans, car loans, and installment loans. Regular household expenses like groceries or utilities are generally excluded.
What happens if all four inputs are entered?
If all four variables (GAI, TMD, PITI, and DTI Limit) are entered, the calculator will verify the consistency of the inputs. It will calculate the implied DTI based on your inputs and compare it to the DTI Limit you specified, indicating whether your planned payment meets the required qualification ratio.