In this market, lenders almost always use income to ensure mortgage affordability, regardless of the amount of down payment. They use the mortgage calculator which helps them to determine calculate affordability which varies from lender to lender but for the most part, four times your gross income is a good rule of thumb.
How much can you afford more precisely? The shortest answer to that question is: it depends on a number of factors. The most important are:
Your gross household income
Your down payment
The mortgage interest rate
The mortgage terms
Your mortgage insurance
Lenders will also consider your assets and liabilities. Your own lifestyle and debt comfort zone also come into play here.
Your Maximum Mortgage Calculation is based on two simple rules that lenders use to determine how much of a mortgage you can afford. The first rule is:
Your monthly housing costs should not exceed 32% of your gross monthly household income (this can be up to 40% with some banks). Housing costs include monthly mortgage payments, taxes and heating expenses. If applicable, this sum should also include half of monthly condominium fees.
Your entire monthly debt load should not be any more than 42% of your gross monthly income. This includes housing costs, and other debts such as car payments, personal loans, credit card payments and the like.
Note: Rules and guidelines are subject to change. Please inquire within.