First-time Homebuyer 101: Income & Debt

First-time Homebuyer 101: Income & Debt

Income is the #1 factor that determines “how much house” you can afford.

Mortgage lenders use your income to establish the monthly housing payment you can support. More income means more Homebuying Power. In general, for income to qualify, it must be:

  • ✅ Verifiable (i.e. on your taxes) 
  • ✅ Steady (i.e. at least one to two years of history)

The fastest way to increase your budget is to get a joint mortgage. Adding a spouse, partner, family member, or friend means you can pool your income.

💡Keep in mind, however, that the rest of their financial profile (credit, debt, assets, etc.) will also be considered. In some cases that will help, but in others, it may hurt.

Your income must be able to support your mortgage and any other debt payments.  When setting your budget, a lender will factor in your existing debt obligations (e.g. a car lease or student loans). They will not include rent or credit card balances you pay off in full each month.

🔑 Ultimately, it is your debt-to-income ratio that determines the size of the monthly payment a lender will approve you for. If your monthly pre-tax income is $5,000, and your monthly debt obligations are $500, your DTI is 10%.

👉 Multiply your monthly income by 36% to get a sense of the total monthly payment (housing + other debt) you can comfortably carry.

In addition to your income and debt, your house budget is also determined based on your:

  • 💲 Assets (AKA cash)
  • 📊 Credit score
  • 🏦 Mortgage (loan type, lender, rates)

Need help figuring out your Homebuying Power? Let us help! Gravy’s Homebuying Power calculator uses your income, debt, credit, assets, and other factors to estimate your current budget. Plus, get tips and tools to increase your Homebuying Power.

Get started right from the Gravy app! Track and build your Homebuying Power (it’s free).

❤️ Gravy is designed to help first-time homebuyers maximize their Homebuying Power so you can buy with confidence on your schedule.

Check out our other first-time homebuyer guides:

Will Dunn
Will Dunn
Gravy Co-Founder and Chief Growth Officer
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