• How much mortgage do you qualify for?
• Given your debt and income, can you afford the monthly mortgage payment?

To figure out the answers to these questions, lenders evaluate your debt-to-income (DTI) ratio.

Debt-to-income ratio requirements

Your DTI ratio, also known as the “back-end” ratio, is a measure of gross monthly income against monthly debt payments. To calculate your DTI ratio, simply divide your monthly debt payments by your gross monthly income.

Income requirements by mortgage type

While there’s no minimum income requirement for a mortgage, there are parameters around DTI ratio.

When underwriting conventional mortgage loans, most lenders follow the guidelines of Fannie Mae and Freddie Mac, the two government-sponsored enterprises that back or purchase most home loans in the U.S.

For a conventional conforming loan — the most popular type of mortgage — Fannie Mae allows a DTI ratio of up to 36 percent. However, that limit can go up to 43 percent if there are other “compensating factors,” like a bigger down payment, higher credit score or adequate reserves.

Like conventional loans, FHA loans don’t impose a specific income requirement, but do have a DTI ratio threshold: up to 50 percent. For VA loans and USDA loans, that standard is typically 41 percent.

What sources of income qualify for a mortgage?

You can use many different sources of income to qualify for a mortgage, including:

Employment income

• Base pay or wages
• Bonuses, commissions and overtime payments
• Self-employment income

Other forms of income

• Dividend or interest income
• Retirement income
• Alimony and/or child support
• Schedule K-1 (income/distributions from partnerships, S corporations, estates)
• Pension income
• Trust income
• Disability payments
• Social Security payments

Whichever type of income you have, you’ll need to give your lender documentation to support your claims. Here’s a list of common documents needed for a mortgage.

Other factors that impact mortgage qualification

Beyond your income and DTI ratio, lenders also review your:

• Credit score – For a conventional loan, you’ll need at least a 620 FICO score. If you don’t qualify, you might consider an FHA loan, which allows scores as low as 580.
• Down payment – For a conventional loan, the down payment requirement can be as low as 3 percent.

Bottom line on mortgage income requirements

You don’t have to make a lot of money to qualify for a mortgage; you simply need to be able to afford the monthly payments based on the type of loan you’re getting, how much other debt you have and the price of the home you want to buy. This’ll be determined largely by your debt-to-income (DTI) ratio, but also by factors like your credit score, which affects your interest rate, and down payment, which impacts how much you’ll need to borrow. Use this calculator to get an idea of how much you might be able to afford.