How Much Mortgage Will I Be Approved For? Debt-to-Income Explained

The Number Lenders Actually Look At

One of the first questions buyers ask me is, "How much will I be approved for?" The honest answer is that it depends less on your salary alone and more on one number: your debt-to-income ratio, often called DTI.

Your DTI compares the monthly payments you already owe to the money you bring in each month. Lenders use it to decide how big a mortgage payment you can take on. Once you understand it, you can estimate your own approval range before you ever talk to a lender, and you'll know which levers to pull if the number comes back lower than you hoped.

If you'd rather skip ahead and run your own numbers, try my home affordability calculator. It uses the same math as the example below.

What Debt-to-Income Ratio Means

Debt-to-income is simple division: your total monthly debt payments, including the new house payment, divided by your monthly income. If you earn $6,000 a month and your debts plus your new mortgage add up to $2,400, your DTI is 40%.

Lenders generally calculate this using your gross monthly income, which is what you earn before taxes and deductions come out, not your take-home pay. That's an important detail, because it means the approval number can be higher than what feels comfortable once you look at your actual paycheck.

Many lenders like to see a total DTI somewhere around 35% to 40%, and some loan programs can go higher for buyers with strong credit, savings or other factors. Your lender will tell you exactly where the limit sits for your loan.

Which Debts Count

Lenders count the monthly payments that show up on your credit report, plus the new housing payment. That usually includes car payments, the minimum payment on each credit card, student loans, personal loans, and any other mortgages you already carry. Child support or alimony you pay can count too.

What usually doesn't count: everyday living costs like groceries, gas, utilities, cell phone bills, streaming services and insurance on your car. Those matter for your real budget, but they aren't part of the DTI math.

For credit cards, lenders use the minimum payment shown on your report, not your full balance. That's why paying down a card can raise your approval amount even if you don't pay it off completely.

Worked Example: From Income to Monthly Housing Budget

Here's how the math works for a buyer earning $6,000 a month before taxes, using a 40% DTI limit and a couple of typical monthly payments.

What That $1,650 Has to Cover

That $1,650 isn't all going toward the loan itself. Your monthly house payment includes principal and interest, property taxes, homeowners insurance, and mortgage insurance if you put less than 20% down. If the home has an HOA, those dues count too. In coastal parts of Hampton Roads, flood insurance can also be part of the payment.

Once you know your housing budget, you can work backward to a price range. My mortgage calculator breaks a payment into each of those pieces, and my home affordability calculator does the whole thing in reverse, from your income to an estimated home price.

Using 35% instead of 40% in the same example lowers the maximum total debt to $2,100, and the house payment budget to $1,350. That gap is why it's worth knowing which limit your lender is using.

How to Raise the Amount You Qualify For

Pay down or pay off a debt. Eliminating a $425 car payment in the example above adds $425 a month to your housing budget, which can mean tens of thousands of dollars more in purchase price.

Avoid new debt before you buy. A new car loan or store credit card in the months before closing can shrink your approval, or even put a pending approval at risk. Talk to your lender before you open anything new.

Consider the loan type. FHA loans and VA loans can allow more flexibility on DTI for some buyers than a conventional loan. My VA vs. FHA comparison explains the differences.

Add a co-borrower. A spouse or partner's income can raise the total, though their debts count too.

Put more down or lower the payment. A bigger down payment, removing mortgage insurance, or help from Virginia Housing down payment assistance can make the same budget stretch to a higher price.

Approved For vs. Comfortable With

The amount a lender approves is the maximum, not a target. Because DTI uses income before taxes and ignores things like childcare, gas and savings, the top of your approval can feel tight in real life.

I encourage buyers to look at their take-home pay and monthly spending too, then decide on a payment they'd feel good about even in a tighter month. My guide on how much house you can afford in Hampton Roads walks through that side of the decision.

Getting a Real Number

An online estimate is a great starting point, but a pre-approval from a lender is the number that counts when you make an offer. A local lender will pull your credit, verify your income and tell you exactly what you qualify for and which loan fits best. My guide to choosing the best FHA lenders in Hampton Roads explains why local lenders often make the process smoother.

I work with several trusted local lenders and can connect you with one that fits your situation. Getting pre-approved is one of the first steps on my Hampton Roads buyer's agent page, and first-timers can see the whole process on my first-time buyers page.

Reach out to me directly and I'll help you turn these numbers into a real pre-approval and a home search that fits your budget.

This article is general information, not legal or financial advice. Every lender and loan program sets its own debt-to-income limits, so confirm your numbers with a licensed lender before you shop.