Calculating your max mortgage loan amount based on your income

When you’re planning to buy a home, making sure that the home is affordable is incredibly important. You don’t want to wind up house poor, putting more of your income than is sustainable toward your mortgage payment.

One way to know how much house you can afford is to determine what your maximum mortgage payment per month is. This can help you plan your future budget, focus your home search, and make realistic offers.

We’ll break down how you can determine your maximum mortgage amount.

Maximum mortgage amount calculator

Figuring out how much home you can afford starts with having the right tools. Rocket Mortgage^® offers a home affordability calculator, which lets you provide info about your income, location, cash to buy, and monthly debt to get a sense for how much you can afford each month. It generates a possible max mortgage amount that can give you a clear picture of homes you could realistically consider buying.

How to calculate your max mortgage amount based on your income

How much mortgage you can afford¹ is all about your levels of income and expenses. Many lenders assume that you can afford a home with a price that is about 2.5 times your annual income, assuming you have little other debt, meaning your debt payments total less than 10% to 15% of your gross monthly income. Some lenders may approve a loan for a home that costs more than 2.5 times your annual salary, depending on other factors.

Another term for this measurement is debt-to-income (DTI) ratio. This ratio is your monthly debt payments divided by your gross income. If you have $1,000 in monthly debt payments and make $6,000 a month, your DTI ratio is $1,000 / $6,000 = 16.67%.

You can determine your maximum mortgage amount by figuring out your monthly income, monthly debt payments, and how much you can afford to pay toward a mortgage each month based on those numbers.

1. Start with your gross monthly income

The first thing you need to do is figure out your gross monthly income. That’s the amount you make before any deductions, such as taxes, insurance payments, or other things that take money out of your paycheck.

We’ll assume for this example that your gross income is $8,972.29.

2. Find your max monthly housing budget with the 28/36 rule

The 28/36 rule is a rule of thumb that states that no more than 28% of your income should go toward housing, and no more than 36% should go toward all debt payments combined. It relates to your DTI ratio.

Lenders use two different DTI ratios when determining how much mortgage you can afford. Front-end DTI is the first number, 28%, which includes only your housing costs. Back-end DTI is the second number, 36%, which includes all debt payments.

You should use the lower of these two numbers when figuring out how much you can afford.

Assume you have $717.78 in monthly payments toward other debts.

28% of your gross income, $8,972.29, is $2,512.24, so you can put a maximum of $2,512.24 a month toward your housing costs.

36% of $8,972.29 is $3,230.02, which is the most you should put toward all of your debts. Subtract your $717.78 in other debt payments from this number, and you arrive at $2,512.24 as your maximum mortgage amount. This is the lower of the two numbers, so use this as your maximum housing cost.

Remember, this includes all of your housing costs, like HOA fees, taxes, and insurance.

3. Subtract estimated taxes and insurance

The total housing payment calculated above must include all of the costs of owning a home. Principal and interest payments are just one portion of what’s included in your mortgage. You also have to pay for things like taxes and insurance.

Let's assume that you need to pay $100 a month for insurance for the home you’re looking at and $200 a month in property taxes. Subtract that from the $2,512.24 number above, and your maximum principal and interest payment is $2,212.24.

4. Convert your monthly PI budget into a loan amount

Now that you know the maximum amount you can pay each month for principal and interest, you can calculate your maximum mortgage amount. You’ll need to know the interest rate and term of your potential loan. Here’s the formula:

Maximum loan amount= principal and interest payment × ((1 - (1 + interest rate ÷ 12)^ (-Term × 12))  ÷ (interest rate ÷ 12)

Now let’s substitute in the actual numbers. We’ll assume an interest rate of 6.5% (6.778% APR) and a 30-year term.²

Maximum loan amount= $2,212.24 × ((1 - (1 + .065 ÷ 12)^ (-30 × 12))  ÷ (.065 ÷ 12)

In the example above, you can afford a loan of about $350,000.

You can plug your income, debts, down payment, interest rate, loan terms, property taxes, insurance costs, and other factors into a home affordability calculator to get a better sense of how much you can afford in your specific circumstances.

5. Factor in additional costs

It’s no secret that homeownership is expensive. Your monthly mortgage payment is just one piece of the puzzle when it comes to affording a home. Keep these other costs in mind to make sure you can really afford to buy a specific home:

• Down payment: A down payment is an upfront payment that you make to buy a home. Usually, it ranges from 3.5% to 20% of the home’s value.
• Closing costs: These are costs you pay when you close on the purchase of a home. Closing costs cover things like underwriting fees, origination fees, appraisals, and more. They can total 2% to 6% of the loan amount.
• Private mortgage insurance (PMI): With conventional loans where you make a down payment under 20%, you must pay for private mortgage insurance. PMI is an additional monthly fee that protects your lender from the possibility that you’ll default on the loan.
• HOA fees: If your home is in a homeowners association, you’ll pay HOA fees that help pay for the operation and maintenance of the HOA and its amenities.

While the down payment and closing costs are upfront fees, PMI and HOA fees are monthly costs that you’ll want to account for in your budget. All can have an impact on the price of the home you can afford.

Should you borrow the maximum mortgage amount available?

Just because a lender approves you for a loan does not mean that you should borrow the full amount.

A lower loan amount means a lower payment. You may decide that the lower amount fits your budget better.

Also consider that life is unpredictable and your circumstances may change. If you max out your mortgage, you could quickly hit trouble if your income drops or you lose your job. You also want to make sure you have flexibility in your budget to do things like save for the future, deal with emergencies, and have some cash for daily living expenses.

The less you borrow, the less your home will cost and the more flexibility you will have, so keep that in mind before you opt for the biggest loan you can qualify for.

The bottom line: Use a calculator to determine your max mortgage amount

Determining how much home you can afford can be tricky, but it’s an essential part of the homebuying process. You need to consider both your income and your current debt payments to figure out how much you can afford.

To learn how much you can afford, visit the home affordability calculator page. There are also a number of other calculators that can be helpful on your homebuying journey. If you’re ready to take the next step, you can reach out to Rocket Mortgage to see what you may qualify for.

¹ This article is for informational purposes only and is not intended to provide financial, investment, or tax advice. You should consult a qualified financial or tax professional before making decisions regarding your retirement funds or mortgage.

² An interest rate of 6.5% (6.778% APR) is for the cost of 1.875 point(s) ($6,562.50) paid at closing. On a $350,000 mortgage, you would make monthly payments of $2,212.24. Monthly payment does not include taxes and insurance premiums. The actual payment amount will be greater. Payment assumes a loan-to-value (LTV) of 80.00%. Payment is valid as of December 17, 2025.