How we got here
What’s behind the numbers?
NerdWallet’s Mortgage Income Calculator shows you how much income you need to qualify for a mortgage. It uses five numbers – home price, down payment, loan term, interest rate and your total debt payments – to deliver an estimate of the salary you need to buy your home. After those first five inputs, you can answer optional questions (see below) to refine your result.
How to calculate your required income
To use the Mortgage Income Calculator, fill in these fields:
- Home’s price
- Down payment
- Loan term (5, 10, 15, 20 or 30 years)
- Mortgage interest rate
- Recurring debt payments. Here’s where you list all your monthly payments on loans and credit cards. If you don’t know your total monthly debts, click “No” and the calculator will ask you to enter monthly bill amounts for:
- Car loan or lease
- Student loan
- Minimum credit card payment
- Personal loan, child support and other regular payments
- Monthly property tax (the calculator assumes a tax rate of 1.1% of the home’s value; you can adjust for a more accurate result)
- Monthly homeowners insurance (the calculator assumes a premium of 0.5% of the home’s value; you can adjust for a more accurate result)
- Monthly homeowners association fee (include only if required)
How to interpret the results
The calculator shows two sets of results:
- Most lenders require borrowers to keep housing costs to 28% or less of their pretax income. Your total debt payments (including housing costs) can’t usually be more than 36% of your pretax income.
- Some mortgage programs – FHA, for example – qualify borrowers with housing costs up to 31% of their pretax income, and allow total debts up to 43% of pretax income.
Use our Debt-to-income Calculator to find your DTI ratio and learn more about debt’s role in your home purchase.
Required income 101
Your debt and salary limit what you can afford
Besides showing you how much income you need to afford the home you want, this calculator also shows how your debts can compromise your chance for a mortgage. You can see how paying down debts directly affects your buying power. The fewer debts you have, the more of your salary can go toward the home, allowing you to afford a more expensive property. At the same time, more debts mean less money available, based on your current salary, to pay for – and qualify for – the home you want.
You can use this calculator to visualize how a higher or lower salary could change your ability to afford the home of your dreams. What if you got a raise? Or took a weekend job? You can vividly see how you could afford different homes with more income, or less.
Know what’s standing in your way
Unfortunately, not everyone is financially ready to buy a home. This Mortgage Income Calculator will show some people that buying, at least at this point, is not within their grasp and offer an understanding of what financial obstacles stand in the way.
This calculator may show you that not enough down payment is your problem. Or maybe it’s too much debt. Perhaps you simply need to earn more to buy the home you want and need. Or, if you reassess your ambitions, can you afford a less-expensive home?
Private mortgage insurance
The calculator does not include costs for private mortgage insurance. You’ll be required to pay PMI if your down payment is less than 20%. PMI is based on the down payment, credit score and type and size of a mortgage. Rule of thumb: Plan on paying from about 0.41% to 2.25% of the loan amount annually for PMI.
Here’s why it’s necessary to include PMI in your calculations: The more of your income you have to spend on PMI, the less is available to spend on your mortgage.
Here are two ways to include an estimated PMI cost into your home purchase calculations:
- Use a mortgage calculator. You can calculate the monthly payment, including PMI, by entering your details into our Mortgage Calculator.
- Estimate a low and high range of PMI payments. For the low payment, multiply your loan amount by 0.55% (see the “rule of thumb” as explained above). For the high payment, multiply the loan amount by 2.25%. Using a $300,000 mortgage, here’s an example:
- Low payment: $102.50 month ($300,000 x 0.41% = $1,650 a year/12 months = $103.50)
- High payment: $562.50 per month ($300,000 x 2.25% = $6,750 a year/12 months = $562.50)
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