Maximum Mortgage Calculator

Use this calculator to find out the maximum mortgage amount you can borrow at various interest rates. The calculator looks at the total cost of the mortgage and your ability to pay. It looks at your income and debt payments as well as the property tax and insurance, and the mortgage term you will choose. This method of comparing the size of the mortgage and other debts and costs against a person's income is called the debt-to-income ratio. The calculator does not show you your debt-to-income ratio. But it does use it internally to decide how big of a mortgage you can get. Most lenders use roughly the same debt-to-income ratio when qualifying mortgage applications.

One important factor this calculator does not consider is your credit. Instead, it simply looks at different interest rates. Keep in mind that your available interest rates will be determined in large part by your credit score (FICO). The higher your FICO score, the lower your interest rate at any given moment.

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Calculator Legend

Monthly income: the total current monthly earnings of those taking out the mortgage. If a married couple is taking out the mortgage, the income figure will be their combined monthly income. Note: the income figure is only what you are earning now, not reflecting any future earning increases or decreases. If you are self-employed or paid on commission, the mortgage lender will probably want to take the average of your last two years of income.
Monthly Debt Payments: amount you are paying on average each month toward car loans, education loans, credit card debt, and other debt. The calculator only allows you to select a single amount for the sake of simplicity. In reality, of course, your debt may increase or decrease over time, but the lender will likely want the average amount you are paying toward debt now.
Monthly taxes and insurance: the total amount you would have to pay in property taxes on the property you want to buy in one year, at the current tax rate and assessed value. Over time, this amount will change as property taxes and/or the assessed value changes, but the mortgage lenders' formula only asks for the current year's amount.
Start Interest Rates at: the interest rate quoted on the lowest-interest-rate mortgage. The calculator lets you specify between 1% and 18% (though you will almost certainly not get either such a low or such a high interest rate). The calculator assumes you are applying for a traditional fixed-rate mortgage, not an adjustable rate mortgage (ARM) or interest-only mortgage.
Loan Term: the amount of time you will be making payments, assuming you don't make additional payments to pay down the mortgage earlier. The term is determined at the time you take out the mortgage. The calculator lets you select from 1 to 30 years. (Thirty years is the most common term traditionally.)

Mortgages Explained

A mortgage is a loan from a bank, credit union, or mortgage company that uses the property you are buying as collateral.

Qualifying for a Mortgage

Banks, credit unions, and mortgage companies have set very tight rules for how large of a mortgage to lend an applicant. These lending rules for mortgages look at:
  • Applicant's income
  • Applicant's debt relative to the applicant's income (debt-to-income ratio)
  • Price of the house
  • Standard costs of homeownership
Standard costs of homeownership:
  • Property taxes
  • Mortgage interest
  • Closing costs
  • Insurance

Other Costs of Homeownership

Note that there are other costs of homeownership besides those listed above. Mortgage lenders are aware of these costs. That's why they generally don't give someone the maximum mortgage they might be able to afford just based on the above standard costs. These other, non-standard, "soft" costs of homeownership vary a lot from home to home and homeowner to homeowner. A mortgage lender qualifying someone for a mortgage usually won't try to estimate these actual costs, and instead will just build a little bit of safety room into the qualification calculations. Make sure you have considered what these costs will be in your specific case:
  • Maintenance
  • Repairs
  • Landscaping
  • Utilities: heating, electricity (especially for air conditioning), water
  • Private security systems
In general, if you are moving to a larger home, expect all of these "soft" costs to be higher than where you are living now. If you have been renting a home where water and/or utilities are included, remember these costs as well.

Types of Mortgages

There are various types of mortgage programs available. The calculator, to keep things simple, assumes you are applying for a traditional fixed-rate mortgage. A fixed rate mortgage is a mortgage that only has one interest rate that never changes. Interest rates set by the Federal Reserve and the banks may change, but the mortgage will still have the same interest you got the day you applied for it.

Still, there are other types of mortgages available. They are generally not good for most people, but you should be aware of them. Adjustable rate mortgages have interest rates that the lender can change, or adjust, to match changes in the interest rates set by the Federal Reserve. Because adjustable rate mortgages often have lower interest rates for the first few years than fixed-rate mortgages, they are popular with people who do not expect to own the property for more than about three to five years. Interest-only mortgages, meanwhile, only charge interest for the first few years--you never make a payment against principle. Of course, once the interest-only period is over, you either have to come up with the entire amount or take out another mortgage. In short, an interest-only mortgage is rather like an expensive form of renting.