The Short Answer
Most lenders want your total monthly housing payment (mortgage, taxes, insurance, HOA) plus all other debts to stay below 43% of your gross monthly income. This is called your debt-to-income ratio, or DTI.
For a quick estimate: take your gross annual income, divide by 12, multiply by 0.36 (for conventional) or 0.43 (for FHA), then subtract your monthly debts. That gives you your approximate maximum monthly housing payment.
DTI Ratios: Conventional vs. FHA
Conventional
36% DTI
Conservative guideline. Some lenders go up to 45% with strong compensating factors (high credit, large reserves).
FHA
43% DTI
More flexible. FHA loans also allow 3.5% down with a 580+ credit score, making them popular with first-time buyers.
What Counts as Debt?
Lenders include these in your DTI calculation:
- Car payments
- Student loans (even if deferred — lenders use 0.5-1% of balance as monthly payment)
- Credit card minimum payments
- Personal loans
- Child support or alimony
- Other mortgage payments (if you own other property)
They do not count utilities, groceries, subscriptions, or other living expenses. Only obligations that show up on your credit report.
Real Example: $120,000 Income
Assumptions: $500/mo existing debts, 10% down, 6.75% rate, 1.1% property tax, $150/mo insurance
Conventional (36% DTI)
~$560,000
Max home price
FHA (43% DTI)
~$720,000
Max home price
These are estimates. Use the affordability calculator for your exact numbers.
California-Specific Factors
California home prices are among the highest in the nation. The median home price statewide is around $800,000, which means many California buyers need:
- Jumbo loans: Anything above $766,550 (or $1,149,825 in high-cost counties like LA and SF) requires a jumbo loan, which typically needs 10-20% down and a 700+ credit score.
- Down payment assistance: CalHFA and other state programs can help first-time buyers with down payment and closing costs.
- Non-QM options: Self-employed borrowers and investors can use bank statement loans or DSCR loans to qualify without traditional W-2 documentation.
Property Taxes in California
Thanks to Proposition 13, California property taxes are relatively low compared to other states — typically around 1.1% of purchase price. However, some areas have special assessments (Mello-Roos) that can add 0.5-1.5% on top. Always ask about Mello-Roos when looking at newer developments.
Next Steps
- Use the affordability calculator to see your numbers.
- Get pre-approved — this gives you a concrete number and shows sellers you are serious.
- Talk to me about which loan programs fit your situation. I have access to 50+ wholesale lenders.