Borrowing Power Calculator

To use the home loan borrowing power calculator, you’ll need to enter some basic information about your financial situation and the type of loan you’re interested in.

• Monthly income
  • Wages before taxes and deductions: Your wages before taxes and deductions are also referred to as gross income. You can provide us with your salary or calculate your wages based on the information contained in your tax returns.
  • Investment income before taxes: Income also includes stocks, cryptocurrency, real estate and more.
  • Income from rental properties: Income from rental properties also counts as income and can help us better understand your financial situation.
  • Other income: Other income, such as self-employment income, is also taken into consideration when calculating your borrowing power.
• Monthly payments
  • Auto loans: If you have an auto loan, we’ll need to understand your monthly payments to calculate your total debt obligations.
  • Student loans: Provide us with the minimum student loan payment you make every month.
  • Credit card: Monthly credit card payments can vary, so you can take the average of the last few months’ worth of statements to make this amount as accurate as possible.
  • Alimony & child support: Alimony and child support payments also count as your debt and can affect your loan eligibility.
  • Rental property loans: If you’ve taken out any rental property loans, we’ll need to include them in our debt calculation to compare your income to debt obligations.
  • Other payments: Providing us with any other payments, no matter how trivial, can give the calculator a more accurate depiction of your unique financial situation.
• Loan Info
  • Interest rate: The loan’s interest rate will vary depending on your credit score, loan type and current market rates.
  • Term (years): Most mortgage payment terms are between 15 and 30 years. The longer the term, the less you’ll pay monthly, but the more you’ll pay in interest over the life of the loan.
  • Down payment: The down payment is the upfront amount paid toward the purchase of a property as a percentage of the total purchase price. This initial payment reduces the amount of money you need to borrow, lowering your mortgage loan amount and monthly payments. Down payment minimums vary by loan, typically ranging from 3.5% to 20% or more.
  • Property tax (yearly): Property taxes are calculated based on the assessed value of the property and the local tax rate.
  • Homeowners insurance (yearly): Homeowners insurance rates vary based on the home’s location, its value, the amount of coverage, the home’s construction and its age.

Borrowing power is the amount of money someone might be able to borrow from lenders. It estimates your ability to repay a loan based on financial factors like income, expenses, debt and credit score. Prospective homeowners should use a borrowing power calculator to determine the right time to contact a lender and buy a home because it gives them an idea of how much they can afford without overstretching their budgets. 

Our borrowing power calculator provides two estimates — conservative and aggressive. The conservative estimate demonstrates how much you can afford to borrow comfortably without a mortgage loan affecting your other financial obligations. On the other end of the spectrum, the aggressive estimate demonstrates the maximum amount you might be able to borrow. However, the aggressive approach is more likely to stretch your budget and leaves little room for unexpected expenses or changes to your financial situation. 

You can use this information to build a better budget when it comes to purchasing a home. It will also help set realistic expectations before you begin house hunting.

Borrowing power is calculated based on the same financial factors that can affect your loan eligibility and amount. Metrics used to calculate borrowing power include: 

• Income: Your income is one of the most important metrics lenders use to determine your ability to repay a loan because it demonstrates how much money you bring in every month. 
• Expenses: Unfortunately, some of your income goes toward paying expenses like bills and other essentials, so not everything you earn counts toward securing a loan. 
• Credit score: Your credit score demonstrates your creditworthiness to a lender. Lenders need to know you’re someone who pays their debts on time. The higher your score, the better your interest rate might be, potentially allowing you to borrow more. 
• Existing debt: Again, not all of your income stays in your pocket. Comparing your income to your debt gives the lender a metric known as the debt-to-income (DTI) ratio, which tells them how much of your income goes toward paying your debt. The higher your DTI, the less money you have to spend on repaying your mortgage.
• Loan term: The loan term is the amount of time you have to repay your debt and ranges from 3.5% to 20% or higher, depending on the type of loan. The longer your repayment period, the more a lender might be willing to let you borrow because your monthly payments will be lower.

Borrowing power is calculated using a combination of factors that give lenders key insights into your financial situation and ability to repay a mortgage loan. Factors that influence how much a lender might let you borrow include:

• Income: Income is a starting point for determining your borrowing power. Typically, the more you earn, the more you can borrow, but loan amounts also depend on the amount of debt you have. 
• Employment stability: Lenders like to see that you’ve been employed for at least two years to ensure a steady and consistent income stream. 
• Credit history: Your credit history and score are a representation of your creditworthiness. A higher score can increase your borrowing power because it shows lenders you’re more likely to repay the mortgage debt. 
• Debt-to-income ratio: Lenders compare your existing debt to your income to tell them your DTI. If you have high levels of debt, it could decrease your borrowing power because it means you have less cash flow to repay the loan.
• Interest rates: Interest rates determine the cost of the loan and your monthly repayments. A higher interest rate means higher monthly payments, reducing the amount you can afford to borrow. On the other hand, a lower interest rate can increase your borrowing power by making repaying the loan more affordable.

There’s no guaranteed method for increasing your borrowing power because it’s calculated by lenders differently and based on various factors out of your control, such as interest rates. However, there are some ways you can potentially increase your borrowing power by focusing on the factors you do have control over.

• Reduce existing debt: The less debt you have, the lower your DTI will be, showing lenders that you can spend more of your income on a mortgage. Reducing your debt can significantly increase your borrowing power. You can see this demonstrated on our home loan borrowing calculator by changing the amount of debt and returning to the results. 
• Increase income: By increasing your income, you increase the amount of money you have available to spend on a mortgage. Even if you have the same amount of debt, you have more to repay the mortgage loan, giving you more borrowing power. 
• Place a bigger down payment: A larger down payment won’t directly influence your borrowing power because a lender determines the amount they’re willing to loan to you, and a down payment is taken out of your pocket. However, it can increase your purchasing power. The more you put down on a home, the less you’ll need to borrow, which means potentially being able to afford a more expensive property. A larger down payment can also make you a more trustworthy borrower, and lenders may reward you with a lower interest rate. 
• Review your credit report: Understanding your credit score can also help you increase your borrowing power by providing key insights that help you learn how to build good credit.
• Choose the right loan: Loan interest rates and terms vary based on the type you choose. Finding the right loan can help you save over the life of the loan and increase your borrowing power. 
• Stay current on bills: Avoiding debt by staying current on your bills can increase your creditworthiness, which directly influences your borrowing power.
• Shop around: Lenders are all different, with different loan options, terms and lending criteria. Typically, you can get competitive rates by taking advantage of the benefits of credit unions, but shopping around can help you find the best lender and loan time based on your unique needs.