Mortgage Qualification Calculator

What this calculator is, and when to reach for it

Affordability calculators answer "how much?". This one answers a different question: given a specific payment you have in mind, would a lender’s ratio tests let it through? It is a pass or fail rather than an amount, and that framing turns out to be far more useful once you have a particular property in view.

A lender applies two tests, and you must satisfy both. The housing test asks whether the proposed payment alone is an acceptable share of your income. The total-debt test asks whether that payment plus every other commitment stays within a wider limit. Passing one and failing the other is a decline, and it happens more often than people expect.

The reason this matters is that the two tests fail for completely different reasons and have completely different remedies. Failing the housing test means the payment is too large relative to your income; the fixes are a bigger deposit, a cheaper property, or a longer term. Failing the total-debt test means your existing commitments are crowding it out; the fix is clearing a debt, which may be far quicker.

Reach for this page when you have a specific payment or property in mind, when you want to know how much headroom a proposed purchase would leave, or when an application has been declined and you want to understand which test caused it.

What the housing payment has to include

A lender does not test your principal and interest in isolation. It tests the whole housing cost it expects you to carry: principal, interest, property tax, insurance, any mortgage insurance, and association dues where they apply.

This is the most common reason a self-assessment passes and a real application does not. Someone testing 2,000 of principal and interest against a 2,240 limit feels comfortable, but the lender is testing 2,580 once tax and insurance are added, and that fails.

Enter the full expected housing payment rather than the loan payment alone. If you are unsure of the tax and insurance figures, an estimate you have thought about is far better than leaving them out.

Where to go next

If you want an amount rather than a verdict, the affordability calculator works out the largest loan the same ratios allow, and the home affordability calculator converts that into a price including your deposit.

To build the housing payment you are testing, use the mortgage calculator, which includes tax, insurance, and association charges. If the total-debt test is the one failing, the debt-to-income calculator shows exactly where your income is committed and the credit card payoff calculator shows what clearing a balance would take.

If the housing test is failing, the levers are the deposit and the loan itself: try the down payment calculator and the loan to value calculator, since a larger deposit can also remove mortgage insurance from the tested payment. The buying a home journey sequences the whole process.

How the two tests are applied

Both tests run against the same income, and both must pass. The calculator reports each independently so you can see which one is binding.

housing test: housing payment ≤ I × h   |   total-debt test: (housing payment + other debts) ≤ I × t

I

gross monthly income, before tax and deductions

h

the housing ratio limit, conventionally around 28%

t

the total-debt ratio limit, conventionally around 36%

other debts

existing monthly obligations such as car finance, loans, and card minimums

Why both tests exist

They guard against different failure modes. The housing test protects against a payment that is simply too large to sustain, regardless of how clean the rest of your finances are. The total-debt test protects against a reasonable housing payment stacked on top of commitments that leave no room to absorb anything unexpected.

A borrower with no other debts will usually find the housing test binds, because the wider limit has nothing else consuming it. A borrower with substantial commitments will usually find the total-debt test binds. Which one it is tells you something real about your position.

Reading the headroom figures

Passing is not the same as passing comfortably. The margin by which you clear each test is the more informative output, because it tells you how much could change before the answer flips.

A borrower clearing the total-debt test by 30 a month is technically a pass and practically fragile: a phone contract reported as credit, or a car payment starting next month, would reverse it. A borrower clearing by 600 has genuine room. The verdict is binary; your position is not.

What the tests deliberately ignore

Neither test sees childcare, commuting, medical costs, how many people the income supports, or whether the income is salaried or seasonal. They also measure against gross income, so a payment that satisfies both can still consume a large share of what actually reaches your account.

That is not an oversight so much as a design choice: ratios are meant to be comparable across borrowers, and comparability requires ignoring circumstances. It does mean a pass is a lending judgement rather than a verdict on whether the payment suits your life.

Why a real decision may still differ

Ratios are one input among several. Credit history, how long you have been earning, whether income is stable, the property itself, and the lender’s own appetite all feed into underwriting, and any of them can override a comfortable ratio result.

Equally, strong compensating factors — a large deposit, substantial reserves, a long stable earning history — routinely persuade lenders to accept ratios above their published limits. A fail here is a signal to look at the levers, not a verdict.

What this page assumes

The calculator works out a housing payment limit and a total-debt payment limit from the percentages you enter, then uses whichever limit is lower, the one that matters most, to estimate the loan.

It excludes credit score, employment, assets, valuation, lender overlays, country rules, and government-program assessments.

Worked examples, step by step

Take a household earning 96,000 a year before tax, so 8,000 a month, with 450 of existing monthly debt, testing a proposed housing payment of 2,400 against conventional 28% and 36% limits.

The two tests, run separately

This is the outcome that confuses people most. The household passes the broader test — total commitments of 2,850 sit inside the 2,880 limit — and still fails, because the housing payment alone exceeds its own 2,240 ceiling by 160.

The diagnosis is precise and genuinely useful. Existing debt is not the problem; clearing the 450 car payment would not help, because the failing test does not count it. What is needed is a smaller housing payment: roughly 160 a month less, which a larger deposit, a slightly cheaper property, or a longer term could each deliver.

The same household, the other way round

Now suppose the housing payment is 2,200 and existing debts are 800. The housing test passes with 40 to spare. But total commitments are 3,000 against a 2,880 limit, so the total-debt test fails by 120.

Identical income, identical verdict, opposite cause and opposite remedy. Here clearing even a modest debt fixes it outright, while shopping for a cheaper property would be the slow and unnecessary route. This is precisely why the calculator reports the two tests separately rather than collapsing them into a single answer.

Where the 30 of headroom really leaves you

In the first example, even the test that passed did so by only 30 a month. That is not a comfortable position: a new phone contract reported as credit, a small loan, or a car payment beginning before completion would each reverse it.

Lenders reassess close to completion, so commitments taken on between application and moving day genuinely matter. The practical advice that follows from a narrow pass is simply to add nothing until the transaction has completed.

The vocabulary, on and around this page

Qualification

Whether a proposed housing payment satisfies a lender’s ratio tests. It is a pass or fail rather than an amount.

Housing ratio test

Checks the full housing payment alone against a share of gross income, conventionally around 28%. Also called the front-end test.

Total-debt ratio test

Checks the housing payment plus all other monthly debts against a wider share of income, conventionally around 36%. Also called the back-end test.

Binding test

Whichever test fails, or passes by the smaller margin. It identifies which lever will actually change the outcome.

Headroom

The margin by which a test is passed, expressed as a monthly amount. It shows how much could change before the verdict flips.

Housing payment

Everything a lender counts as housing cost: principal, interest, property tax, insurance, mortgage insurance, and association dues.

Gross monthly income

Income before tax and deductions. Both tests measure against it, which is why a pass can still feel demanding in practice.

Existing monthly debt

Recurring obligations such as car finance, loans, and card minimums. They count only in the total-debt test.

Compensating factors

Strengths such as a large deposit, substantial reserves, or long stable employment that can persuade a lender to allow ratios above its published limits.

Underwriting

The lender’s full assessment, of which ratio tests are only one part. Credit, employment, and the property all feature.

Pre-qualification

An informal indication based on figures you supply without verification. It carries little weight with a seller.

Pre-approval

A more formal review with verified income, debts, and credit. Stronger than pre-qualification but still short of a final decision.

Qualifying payment

The payment a lender actually tests, which may exceed your real one where rules require a stressed rate or an assumed minimum.

Stress test

Assessing the payment at a higher rate than the one offered, to confirm you could cope if rates rose.

Escrow costs

Property tax and insurance collected with the payment. They belong in the tested housing payment even though they are not loan costs.

Mortgage insurance

A premium required below certain deposit levels. It counts within the housing payment and can be what pushes a test into failure.

Loan programme

A specific product with its own ratio limits. Government-backed and specialist programmes often permit considerably higher figures.

Residual income

What remains after debts and living costs. Some programmes test it directly because ratios ignore household circumstances.

Payment shock

A large jump from current housing costs to proposed ones. Lenders weigh it alongside the ratio tests.

Decline

The outcome when either test fails. Which one failed determines whether the remedy is a smaller payment or less existing debt.

Common mistakes, and what this page will not do

• Testing principal and interest instead of the full housing payment. Lenders test tax, insurance, mortgage insurance, and association dues too. Omitting them is the most common reason a self-assessment passes and an application does not.
• Assuming passing one test is enough. Both must pass. In the worked example the household cleared the wider limit and was still declined on the housing test alone.
• Applying the wrong remedy. Clearing debt does nothing for a failing housing test, and a cheaper property is a slow fix for a failing total-debt test. The binding test tells you which lever works.
• Using take-home pay. Both ratios are measured against gross income. Using net pay produces a far stricter result than any lender would apply.
• Treating a narrow pass as safe. Clearing a test by 30 a month is fragile. A single new commitment before completion can reverse it, and lenders reassess late in the process.
• Taking on credit between application and completion. A car, a phone contract reported as credit, or a small loan can turn a pass into a decline after an offer has been accepted.
• Treating 28 and 36 as universal rules. They are conventions. Programmes and lenders differ widely, and many permit considerably higher figures with compensating factors.
• Reading a pass as approval. Ratios are one input. Credit history, employment stability, and the property itself can all change a real decision.
• Confusing a pass with affordability. The tests ignore childcare, commuting, and medical costs entirely, and measure against gross income. A pass is a lending judgement, not a budget.

What this calculator leaves out: This calculator does not check credit, verify income or employment, apply any specific lender’s overlays or stress-rate rules, calculate mortgage insurance, count living costs, or reflect country-specific programme requirements. It applies the ratio limits you choose to the payment and income you enter, and reports each test separately.

Frequently asked questions