Published by: Geoff Smith           August 23, 2022

How Many Times My Income Can I Borrow For A Mortgage

When folks start to think about looking to buy a new home; be it first time buyer or moving up for a growing family; one of the first steps is to figure out how much they can afford. There are many factors that affect how much you can quality for including deposit, net income and credit score, mortgage rate, amount of debt you currently carry and more. One of the common ways of understanding how much mortgage you can afford is by determining an amount based on how many times your salary the mortgage costs. For home buyers at the start of their journey this can give you a general idea of what price you can expect to buy into.

First you should calculate your actual available income you will have to pay towards the mortgage. You do this by taking your income and deducting any fixed monthly payments out of the gross to find the balance you will have to pay out of. For example: You make a $100,000 a year and have $5,000 in student debt loans and car payments. That leaves you with a $95,000 net salary towards your calculation factor. Generally speaking the rule is that you can be approved for a mortgage that is 20-30% of or 3 to 5 times your net salary. So in our scenario you could qualify for a mortgage between $285,000 and $475,000. Now if you are a two person household then you can naturally add both incomes together to get a higher possible mortgage amount.

Remember this is only the mortgage amount and does not include your down payment so for example if you already own a home and have $300,000 to deposit net of fees and taxes etc. then in the one person example above they could afford to buy a home that costs between $555,000 and $775,000. With a second similar income you are then looking at between $840,000 and $1,240,000 for the two of you. Now if you get a mortgage near the higher end of the spectrum remember your cash flow will be tighter and you may not have the same monies that you would at the lower spectrum for the other things you need and enjoy so you much balance out lifestyle vs more home on some level. This should help give you a rough idea of what you can and cannot afford in general but one should always talk with a mortgage professional and once you are serious about buying get that pre-approval and rate hold in place so you have a lot more confidence in your actual financial capabilities and let your journey begin.