How to use the mortgage income requirement calculator
Your income is one of the most important factors lenders consider when deciding if you qualify for a mortgage loan.
To use our calculator, gather the following information:
- The expected purchase price of the home
- Your expected down payment
- Your expected interest rate and loan term (such as 15 or 30-years)
- Your minimum monthly debt payments (school loans, car loans, credit card debt, and other debts and personal loans)
The income requirements calculator will use estimates for your property taxes, homeowners insurance, homeowners association (HOA) fees and private mortgage insurance (PMI). Your actual costs may be higher. If you have your own estimates for these figures, you can include them for a more customized calculation.
Understanding income requirements for a mortgage or refinance
There’s no simple income requirement for a mortgage. The lender instead will look at a variety of factors when determining your eligibility. These include:
- Your gross monthly income
- Your outstanding debt, and debt-to-income ratio (DTI)
- Your credit score and credit history
- Your down payment
- The cost of the home
The importance of debt-to-income (DTI) ratio and the 28/36 rule of thumb
Your DTI shows how your debts offset your income and ultimately how much you can afford to pay each month on a future mortgage payment. Most lenders will look at two types of DTI, and often follow what is known as the “28/36 rule of thumb.”
Your front-end DTI divides your gross monthly income (pre-tax) by your monthly housing costs. Generally, lenders are looking for a ratio that is less than 28%.
Your back-end DTI divides your gross monthly income by your total monthly debts (minimum payments for loans and credit cards, plus housing costs). Lenders usually look for a ratio that is less than 36%.
(Note that some loan programs for first-time homebuyers, such as an FHA loan, allow for higher DTI ratios.)
By considering your DTI, lenders get a better understanding of your ability to afford a home rather than by looking only at your income. If you know your DTI is high, discover ways to reduce your debt-to-income ratio.
Credit score and down payment matter too
Lenders review your credit score and credit history to predict the likelihood that you’ll make your loan payments. Showing that you know how to use credit responsibly gives the lender greater confidence that you can handle the responsibility of a mortgage.
Many lenders require a down payment of at least 20% of the purchase price of the home, as this represents a significant commitment from you as a borrower. If the lender allows a smaller down payment (such as 10% of less), you should expect to pay for private mortgage insurance (PMI). Purchased by the lender and added to your mortgage payment, PMI protects the lender if you default on the mortgage.
Consider all of your verifiable income sources
When researching how much income is needed for a mortgage, it’s important to consider all of your sources of personal income. Chances are, the lender is not solely interested in your primary employment income. Check if the lender accepts the following:
- Part-time job and side hustle income
- Rental property income
- Foster care income
- Royalty income from a contractual agreement
- Schedule K-1 income
- Trust income
- Social Security benefits income
Do you have verifiable documents to prove your income? Learn more about the income documents you’ll need with most lenders.
Examples of income levels needed for different mortgage sizes
Our mortgage income requirement calculator provides estimates for how much income is needed based on the size of a mortgage loan.. Each example below assumes a 20% down payment, and a 30-year fixed-rate mortgage with a 3.5% interest rate. This does not factor in monthly debt, property tax, or insurance costs.
Frequently asked questions related to calculating the income required to get a mortgage:
How much do you have to make to qualify for a mortgage
There’s no universally required minimum income for a mortgage. A lender will look at your income to ensure you’re earning enough to make your future monthly mortgage payments. But how much income the lender requires will vary based on other factors. These include your level of debt, the value of the home, and your down payment. A lender will also review your credit history when determining if you qualify for a mortgage.
What are the income requirements for refinancing a home?
Requirements for refinancing are largely the same as those for getting a mortgage when you buy a home. The lender will want to understand factors such as your debt-to-income ratio (DTI) and your credit history.
How much house can I buy with my current salary?
The amount of house you can buy depends not only on your current annual salary, but other factors such as your level of debt, your credit score and history, and the amount of down payment you’re prepared to make.
Use our income requirement calculator to get an estimate of how much salary and combined personal income you’ll need to buy a home with a mortgage loan.
This information is provided for general informational purposes. All transactions are subject to credit approval. Contact a mortgage banker for a custom quote.