Mortgage Income Calculator
PropertyNest’s mortgage income calculator will help you figure out how much you need in order to afford a house or mortgage of your choosing. Simply input the amount you want to spend on your new house, your desired interest rate and loan term, down payment, your monthly expenses and debt, and your credit score.
How We Got Your Results
PropertyNest’s Mortgage Income Calculator produces results based on these criteria: the price of your desired property, the amount you plan on putting down, how long you plan to pay off your loan (loan term), interest rate, and your total current debt. You can advance your results by adding any known HOA fees, insurance, and property taxes for your selected home.
Understanding the Results
Why Your Income Matters
Debt Affects Your Income
Along with your credit score, lenders will base the loan size and interest rate they are willing to lend to you on your income. You can view your debt-to-income ratio as how banks view your “true” income. Most lenders won’t allow your DTI to exceed 36% of your gross income. Ideally, the DTI should be less than 30%. A high DTI could mean a smaller loan, higher rates, or being disqualified for a loan altogether. If you have high debt, lenders may seriously doubt our ability to take on more. Many cooperatives in New York also have limits on your DTI. Even if you’ve found a lender who’s willing to work with you with a lot of debt, a co-op may still reject your application.
Your Ability to Buy a Home
The reason PropertyNest’s Mortgage Income Calculator matters is that you’ll be able to determine your ability to buy a home period. The results may influence you to adjust your expectations and your budget. It can even help you decide if you can afford to buy altogether. Adjusting your budget will not only affect the size of the property you want in terms of square footage and number of bedrooms, but the age and condition of the property, along with the neighborhood/area, and the type of property. If debt is affecting your income, you can take steps to pay down the debt before you buy.
Other Factors to Consider
Your credit history will help your lenders determine if your are worth the risk. The higher your credit score, the more comfortable your financial institution will feel lending to you. The best credit scores often come with the lowest interest rates the bank can offer you with your loan. If your credit score is less than stellar, it may not completely disqualify you from a mortgage, especially if you are a first-time buyer or a Veteran. FHA and VA loans are often more forgiving and you may be able to qualify for a loan with a credit score in the low 600’s. It’s not impossible to get a loan even with a score below 600.
Private Mortgage Insurance
PropertyNest’s income calculator does not take private mortgage insurance (PMI) into account. PMI is an additional insurance you may be required to take on if you put down less than the traditional 20% of the home price. This additional insurance is a guarantee for the lender. Because you’ll be paying an additional amount monthly for the first few years, it will affect your ability to pay down the principal of your mortgage.
It is still possible to pay less than 20% down and not be required to purchase PMI, especially if you qualify for first-time buyers programs, either through an FHA-backed loan or a private program with a lender.