When you're self‑employed, lenders look beyond a simple credit score. They evaluate the stability of your business income, your existing debt obligations, and the loan's affordability based on a Debt‑to‑Income (DTI) ratio. Most lenders cap the DTI at around 45 % for self‑employed borrowers.
Key Variables Used in the Calculator
Annual Net Income: Your business's after‑tax profit, averaged over the last two years.
Other Monthly Debts: Car loans, credit‑card payments, student loans, etc.
Interest Rate: The annual percentage rate (APR) offered by the lender.
Loan Term: Length of the mortgage, typically 15 or 30 years.
Down Payment: Cash you put toward the purchase, reducing the loan amount.
How the Calculator Works
It first determines the maximum allowable monthly payment using the formula: MaxPayment = (MonthlyIncome × 0.45) – OtherMonthlyDebts
It then computes the actual monthly mortgage payment for the requested loan amount using the standard amortization formula: Payment = Loan × r / (1 – (1 + r)^‑n)
where r is the monthly interest rate and n is the total number of payments.
Finally, it compares the actual payment with the maximum allowable payment to tell you whether the loan is likely to be approved. It also shows the maximum qualifying loan amount you could afford based on your income.
Why This Matters
Self‑employed borrowers often have fluctuating incomes. By using a realistic DTI cap and accounting for existing debts, this calculator gives a clearer picture of what mortgage size is sustainable, helping you plan your home purchase with confidence.
Tips for Improving Your Mortgage Eligibility
Maintain a strong credit score to secure lower interest rates.
Reduce existing debt to lower your DTI.
Consider a larger down payment to decrease the loan amount.
Provide at least two years of consistent tax returns to demonstrate income stability.
function calculateMortgage(){
var propertyValue = parseFloat(document.getElementById('propertyValue').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var annualIncome = parseFloat(document.getElementById('annualIncome').value);
var otherDebts = parseFloat(document.getElementById('otherDebts').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var loanTerm = parseFloat(document.getElementById('loanTerm').value);
// Validate inputs
if(isNaN(propertyValue) || propertyValue<=0) propertyValue=0;
if(isNaN(downPayment) || downPayment<0) downPayment=0;
if(isNaN(annualIncome) || annualIncome<0) annualIncome=0;
if(isNaN(otherDebts) || otherDebts<0) otherDebts=0;
if(isNaN(interestRate) || interestRate<=0) interestRate=0;
if(isNaN(loanTerm) || loanTerm<=0) loanTerm=0;
var loanAmount = propertyValue – downPayment;
if(loanAmount<0) loanAmount=0;
var monthlyIncome = annualIncome / 12;
var maxPayment = (monthlyIncome * 0.45) – otherDebts;
if(maxPayment0 && totalPayments>0){
var factor = Math.pow(1 + monthlyRate, -totalPayments);
monthlyPayment = loanAmount * monthlyRate / (1 – factor);
}else{
monthlyPayment = loanAmount / totalPayments;
}
// Calculate maximum qualifying loan based on maxPayment
var maxQualifyingLoan = 0;
if(monthlyRate>0 && totalPayments>0){
var denominator = monthlyRate / (1 – Math.pow(1 + monthlyRate, -totalPayments));
maxQualifyingLoan = maxPayment / denominator;
}else{
maxQualifyingLoan = maxPayment * totalPayments;
}
// Qualification status
var qualified = monthlyPayment <= maxPayment ? "Qualified for this loan amount." : "Not qualified – payment exceeds allowable DTI.";
// Display results
document.getElementById('loanAmount').innerHTML = "Requested Loan Amount: $" + loanAmount.toLocaleString(undefined, {minimumFractionDigits:2, maximumFractionDigits:2});
document.getElementById('monthlyPayment').innerHTML = "Estimated Monthly Payment: $" + monthlyPayment.toLocaleString(undefined, {minimumFractionDigits:2, maximumFractionDigits:2});
document.getElementById('maxQualifyingLoan').innerHTML = "Maximum Qualifying Loan (based on income): $" + maxQualifyingLoan.toLocaleString(undefined, {minimumFractionDigits:2, maximumFractionDigits:2});
document.getElementById('qualificationStatus').innerHTML = "Status: " + qualified;
document.getElementById('result').style.display = "block";
}