Required Income for a Mortgage Calculator (2024)

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Calculating Your Mortgage Payment

This mortgage calculator can answer some of the most challenging questions in the home search journey, short of talking to a lender, including what kind of payment can I afford? How much do I need to make to afford a $500,000 home? And how much can I qualify for with my current income?

We’re able to do this by not only considering the loan amount and interest rate but the additional factors that affect yourability to qualify for a mortgage. We include your other debts and liabilities that have to be paid each month and costs like taxes and homeowner’s insurance that are part of the monthly mortgage payment. Doing so makes it easy to see how changes in costs and mortgage rates impact the home you can afford.

While determining mortgage size with a calculator is an essential step, it won’t be as accurate as talking to a lender.

Mortgage Required Income Calculator FAQs

Below are some of the common questions we receive around affordability and the required income calculator.

Calculating the Income Required for a Mortgage

You’ve got a home or a price range in mind. You think you can afford it, but will a mortgage lender agree? Our calculator helps take some of the guesswork out of determining a reasonable monthly mortgage payment for your financial situation.

Mortgage lenders tend to have a more conservative notion of what’s affordable than borrowers do. They have to because lends must ensure the mortgage gets repaid.

Lenders don’t only take into account the mortgage payments but must also look at the other debts you’ve got that take a bite out of your paychecks each month.

Determining this comes down to the debt-to-income (DTI) ratio. DTI is the percentage of your total debt payments as a share of your pre-tax income. A common benchmark for DTI is not spending more than 36% of your monthly pre-tax income on debt payments or other obligations, including the mortgage you are seeking.

Some lenders and loan types may allow DTI to exceed 41%. In these cases, the borrower typically receives additional financial scrutiny.

When calculating yourdebt-to-income ratio, lenders also consider what makes up the entire mortgage payment, including property taxes, homeowner’s insurance, mortgage insurance (if applicable) and condominium or homeowner’s association fees.

What else is included in DTI?

Your debt-to-income ratio also considers auto loans, minimum credit card payments, installment loans, student loans, alimony, child support, and any other expenses you must make each month. It doesn’t typically include recurring monthly charges for utilities, internet service, cable or satellite TV, mobile phone subscription or other charges for ongoing services or other things where the cost is newly incurred each month.

To calculate if you have the required income for a mortgage, the lender takes your projected monthly mortgage payment, adds your expenses for credit cards and any other loans, plus legal obligations like child support or alimony, and compares it to your monthly income. If your debt payments are less than 36 percent of your pre-tax income, you’re typically in good shape.

What if your income varies from month to month? In that case, your lender will likely use your average monthly income over the past two years. But if you earned significantly more in one year than the other, the lender may opt for the year’s average with lower earnings.

Note:Your required income doesn’t just depend on the size of the loan and the debts you have but will vary depending on your mortgage rate and the length of your loan. Those affect your monthly mortgage payment, so the mortgage income calculator allows you to take those into account as well.

Using the Mortgage Income Calculator

Loan information

Begin by entering the desired loan amount, expected mortgage rate, and loan length in the spaces provided. You’ll notice that the required income and a calculation of the monthly mortgage payment immediately appear in the blue box at the top of the calculator.

Note that you can adjust the loan amount and interest rate by using the sliding indicators; left-click and hold on the green triangles to adjust the figures. As you do, the required income level andmonthly mortgage paymentwill immediately change as well.

The calculator also lets you enter information for monthly liabilities and housing expenses. These sections may be displayed or hidden by using the plus ( ) or minus (-) symbols on the right side of the column.

Note:Don’t enter your information for tax payments, homeowner’s insurance or other fees billed on your mortgage statement here, though – those are entered under “housing expenses” further down.

Monthly liabilities

Monthly liabilities is where you enter figures for the minimum monthly payments you must make for auto loans, credit cards, student loans, child support and other obligations. Enter the minimum required and not any higher amount you might voluntarily make.

Enter the same information for your co-borrower if there is one and the two of you have separate liabilities.

Note:Monthly liabilities is for debts and other payments you are legally required to make; don’t enter utility payments, cable or satellite TV, Internet service or other recurring expenses.

Just as with the loan amount and interest rate, you can adjust these figures using the sliding triangles and the required income and monthly loan payments in the blue box will change immediately.

Housing expenses

Here is where you enter the additional costs that are typically billed as part of your monthly mortgage payment: property taxes, homeowner’s insurance, homeowner’s association fees or dues, and private mortgage insurance (PMI) or FHA mortgage insurance, if applicable. Use the worksheet indicated to enter estimates for those figures.

Note:You will only need to pay for mortgage insurance if you make a down payment of less than 20% of the home’s value.

Mortgage insurancetypically costs 0.5 – 1.85 percent of your loan amount per year, billed monthly, though it can go higher or lower depending on your credit score, down payment and length of your loan.

Required annual income for a variety of interest rates

This feature shows how the income required for a home loan of a certain amount varies across a range of interest rates. The lowest rate in the table is the one you selected in the calculator.

Viewing your report

The “View Report” feature will take you to a page summarizing the information you have entered and a table showing the income required for your loan for a range of mortgage rates.