How to Estimate Your Mortgage Payment with a 50% DTI | Live South Bay

When you’re starting your home-buying journey, figuring out how much you can afford is one of the most exciting (and sometimes daunting) steps. While nothing beats a conversation with a lender for accurate numbers, it’s fun to get a ballpark estimate to kick things off—just remember, it’s a rough estimate, not an exact figure.

One key factor lenders use to determine your borrowing capacity is your debt-to-income ratio (DTI). This is the percentage of your monthly income that goes toward paying debts. Understanding your DTI can help you get a clearer idea of your potential purchasing power.

How to Estimate Your Monthly Mortgage Payment with a 50% DTI

Here’s a quick formula to get a rough idea of what you could afford based on a maximum 50% DTI, which some lenders allow:

Calculate Your Monthly Income
Divide your gross annual income by 12 to determine your monthly income.

Apply the 50% DTI Rule
Multiply your monthly income by 0.50. This figure represents the total amount lenders might allow you to spend on debt payments, including your future mortgage.

Account for Monthly Obligations
Subtract your existing monthly debts (e.g., car loans, credit card payments, student loans). The remaining amount is a ballpark figure for your potential mortgage payment.

Example Calculation

Gross Annual Income: $96,000
$96,000 ÷ 12 = $8,000 (Monthly Income)
50% DTI: $8,000 × 0.50 = $4,000
Monthly Debts: $1,500 (car loan + credit cards)
$4,000 - $1,500 = $2,500 for a mortgage payment

What Else Lenders Consider

While DTI is a big piece of the puzzle, lenders also look at:

Credit Score: Determines your interest rate and loan options.
Savings: Verifies funds for a down payment and closing costs.
Loan Program: Different loans have varying requirements and limits.

Get the Full Picture

This quick estimate is a great starting point, but for an accurate understanding of your affordability, it’s always best to consult a trusted lender. They’ll analyze your financial profile and help you choose the best loan program to meet your goals.