California borrowers often have questions about what income they need to purchase a house or condo.
Lenders use a debt-to-income (DTI) ratio to determine how much income a borrower needs to fund their purchase or qualify for financing. Most lenders in California recommend that borrowers stay within a 45% – 50% DTI limit.
Determining How Much Income Buyers Need
The amount of income California buyers will need to purchase a house or condo varies based on a few different factors. Lenders will request documents from borrowers detailing their income, employment history, and any outstanding debts they need in order to calculate their DTI. The DTI determines how much a borrower spends on fixed, recurring expenses (home payments, student loans, car payments, etc.) and how much income a borrower earns each month.
DTI Requirements for Different Loan Types
The 45% – 50% guideline is not set in stone. DTI requirements also vary based on the loan types that borrowers use to finance their home purchase. These are the maximum DTIs a borrower can have for FHA loans, conforming loans, jumbo loans, and VA loans:
- FHA: 46.99%
- Conforming: 49%
- Jumbo: 42.99%
- VA: 60%
A Good Housing Budget
The best way for borrowers to determine how much they can comfortably afford when planning to purchase a house or condo is to get pre-approved by a reputable lender. The goal for borrowers planning to buy is to set a budget that allows them to afford a monthly mortgage payment while also covering all other debts and bills. Borrowers should consider the big picture when planning to save; don’t discount quality-of-life items like family vacations, entertainment, the occasional dinner out, and a little left over in case of emergencies.
Contact us to talk through your options here, by phone at (855) 855-4491, or by email at [email protected]. Our mortgage analysts are highly trained experts and are happy to help new borrowers start their homebuying journey.