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.
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.)