Question 1

How much house can I afford?

Accepted Answer

A common rule of thumb is that your total monthly housing payment (PITI plus HOA and mortgage insurance) should be no more than 28% of your gross monthly income, and your total debt obligations should be no more than 43% of your gross monthly income. Lenders use this second number — debt-to-income ratio (DTI) — as the qualifying ceiling.

Question 2

What is debt-to-income ratio (DTI)?

Accepted Answer

DTI is the percentage of your gross monthly income that goes toward debt payments, including your future mortgage. The 'front-end' DTI is just housing costs; the 'back-end' DTI is housing plus all other debts (cars, student loans, credit cards, child support). Most lenders cap back-end DTI at 43%–50% depending on the loan program.

Question 3

What income counts when qualifying for a mortgage?

Accepted Answer

Lenders use stable, documentable income — typically 24 months of W-2 employment, two years of self-employment tax returns, fixed retirement/pension income, court-ordered alimony or child support, and certain investment income. Bonuses, commissions, and overtime require a 24-month average. Cash, gifts, and one-time income usually don't count.

Question 4

How does down payment affect what you can afford?

Accepted Answer

A larger down payment reduces your loan amount and removes mortgage insurance once you reach 20% equity, which lowers your monthly payment and lets you afford a more expensive home at the same DTI. A smaller down payment lets you preserve cash but means a higher monthly payment and PMI on conventional loans.

How much house can I afford?

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