How Much Can I Borrow Calculator

Mortgage Borrowing Capacity Calculator

How Much Can You Borrow for a Mortgage? Use Our Mortgage Borrowing Capacity Calculator

When buying a home, one of the most crucial questions is, "How much can I afford?" Our Mortgage Borrowing Capacity Calculator is a helpful tool that gives you an estimate based on your income, debts, and property details. While this calculator provides valuable insights, it’s essential to note that each borrower's financial situation varies. Mortgage lenders consider multiple factors beyond what is included in this tool, so use this as a starting point. For a detailed breakdown of the mortgage portion, use our Mortgage Calculator instead.

How the Mortgage Borrowing Capacity Calculator Works

This calculator estimates your maximum and minimum borrowing capacity based on Debt-to-Income (DTI) ratios of 50% (maximum) and 40% (minimum). Your borrowing power is influenced by several factors, including your annual income, monthly debts, home-related expenses, and interest rate.

Understanding Each Field in the Calculator

1. Annual Income ($)

Your annual pre-tax income is a major determinant of your borrowing capacity. Mortgage lenders typically allow borrowers to allocate a percentage of their monthly income toward mortgage payments. Our calculator assumes a 50% DTI (maximum borrowing capacity) and a 40% DTI (conservative borrowing capacity).

2. Other Monthly Debts ($)

This includes recurring obligations such as car payments, student loans, credit card minimums, and personal loans. These fixed expenses reduce the amount of income available for mortgage payments.

3. HOA Fees (if applicable) ($)

Many condominiums and planned communities charge Homeowners Association (HOA) fees for maintenance and shared amenities. If applicable, this monthly expense is factored into your total home-related costs.

4. Home Insurance ($)

Lenders require borrowers to maintain homeowners insurance to protect the property. This value varies depending on location and property value, but our calculator assumes a default of $100 per month.

5. Property Value ($)

The estimated value of the home you are looking to purchase. This figure is used to determine the property taxes (assumed at 1.25% annually) and helps calculate potential down payment requirements. As a realtor in Alhambra, it’s part of my job to help you estimate the true market value of homes before making an offer. This will help you make the best competitive offer.

6. Mortgage Interest Rate (%)

The annual interest rate on your loan significantly impacts your monthly mortgage payment. Our default rate is 6.75%, but users should adjust this value based on their expected loan offer.

7. Loan Term (Years)

The length of the mortgage (e.g., 30 years) affects how much you pay each month. A longer loan term reduces monthly payments but increases total interest paid over time.

How the Calculator Estimates Borrowing Capacity

Once you input your financial details, the calculator estimates your borrowing capacity using the following approach:

  • Monthly Income: Your annual income is divided by 12.

  • Property Tax Calculation: Estimated at 1.25% of the property value per year, divided into monthly payments based on the general property tax rate in Los Angeles County. Do note that property tax values can vary, depending on which neighborhood you’re browsing properties in. Some of the best neighborhoods may have Mello-Roos, or special assessment taxes which can increase property taxes beyond the usual 1.25% a year.

  • Total Fixed Expenses: Includes insurance, HOA, and property tax.

  • Debt-to-Income Ratios: Calculates mortgage borrowing capacity at 50% DTI (maximum) and 40% DTI (conservative).

  • Loan Amortization Formula: Uses the standard mortgage payment formula to determine how much you can borrow based on the available monthly income.

Results Breakdown

Max Borrowing Capacity (50% DTI)

  • Estimated Loan Amount: The highest amount you may qualify for.

  • Required Down Payment: If negative, defaults to $0.

  • Total Monthly Payment: Includes mortgage principal, interest, property tax, HOA, and insurance.

Min Borrowing Capacity (40% DTI)

  • Estimated Loan Amount: A more conservative estimate.

  • Required Down Payment: Defaults to $0 if negative.

  • Total Monthly Payment: Includes all homeownership costs.

Monthly Financial Summary (20% Down Payment)

For comparison, the calculator also estimates mortgage payments assuming a 20% down payment. This allows users to compare total monthly costs when putting down a larger upfront amount.

Limitations and Considerations

While this mortgage borrowing calculator provides useful insights, it is an estimate and does not account for:

  • Credit score impacts on loan eligibility.

  • Additional lender fees (e.g., PMI, closing costs).

  • Adjustable-rate mortgages (ARMs) and interest rate fluctuations.

For personalized advice, consult with a mortgage lender to determine your specific eligibility and loan options.

Try the Mortgage Borrowing Calculator Today!

Use this calculator to explore different financial scenarios and prepare for your home-buying journey. By adjusting your income, debt, and expenses, you can see how your borrowing capacity changes. Understanding these factors will help you make informed financial decisions as you move closer to homeownership.