How to Calculate How Much Can I Borrow?
What is How Much Can I Borrow??
A loan affordability calculator determines the maximum loan amount you qualify for, given your income, existing debts, and the lender's debt-to-income (DTI) limits. Banks typically require total monthly debt payments to be below 36–43% of gross monthly income.
Step-by-Step Guide
- 1Max monthly payment = Gross monthly income × DTI limit − Existing monthly debts
- 2Maximum loan = Monthly payment × ((1 − (1+r)^(−n)) / r)
- 3Front-end DTI: housing costs only ≤ 28% of income
- 4Back-end DTI: all debts ≤ 36–43% of income (lender-dependent)
Worked Examples
Input
$6,000/month income, $400 car payment, 36% DTI, 7%, 30yr
Result
Max loan: ~$250,000
Max payment: $1,760, net of car: $1,360
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