The math lenders really use
One of the first (and most important) questions buyers ask is: “How much house can I afford?”
For many, the answer feels like a mystery—part math, part guesswork, and part “hope for the best.” But the truth is far more structured. Lenders follow clear rules, formulas, and guidelines to determine affordability long before a buyer ever writes an offer.
Understanding that math puts you in control and helps you shop with clarity instead of uncertainty.
The Foundation: Your Debt-to-Income Ratio (DTI)
At the core of every affordability calculation is the debt-to-income ratio, or DTI. This looks at how much of your monthly income goes toward debt payments.
Here’s how lenders calculate it:
DTI = (Total monthly debt payments ÷ Gross monthly income)
Your monthly debts include:
- Car loans
- Student loans
- Credit cards
- Personal loans
- Other mortgages
- Proposed mortgage payment (principal, interest, taxes, insurance, HOA if applicable)
For most loan programs:
- Conventional loans typically allow DTIs up to 45%, sometimes higher with strong credit.
- FHA loans may allow DTIs into the 50%+ range depending on overall profile.
- VA loans use a unique “residual income” calculation but often allow flexible DTIs.
The lower your DTI, the more room you have to qualify for a larger home.
Loan Type Matters More Than Most Buyers Realize
Different loan programs have different limits:
Conventional Loans
These follow tighter rules but reward strong credit profiles.
Buyers with excellent credit may be approved for more than they expect.
FHA Loans
More flexible on credit and DTI, which can increase purchasing power for many buyers.
VA Loans
Focus on residual income rather than strict ratios, often allowing higher affordability.
USDA Loans
Require meeting income limits but also follow DTI guidelines that impact affordability.
Understanding which loan program fits you best helps determine your realistic price range.
Affinity Home Lending’s Approach: Responsible, Not Restrictive
At Affinity Home Lending, our goal isn’t to push borrowers into the maximum amount the system allows—it’s to help you choose a price point that aligns with your comfort level and financial goals.
We look at:
- Your full financial picture
- Your monthly comfort zone
- Your long-term stability
- Market conditions and payment projections
- Potential changes (insurance, taxes, HOA increases, etc.)
The number on a pre-approval letter is important.
The number you feel good about is even more important.
We help you strike the right balance.
Why Guessing Is the Worst Strategy
If you guess too low, you eliminate homes that might be perfect.
If you guess too high, you risk stretching beyond your comfort zone.
Let the math—and the right guidance—do the work for you.