Mortgage Income: How Your Earnings Determine What You Can Borrow

When you start looking at houses, the first question isn’t the price – it’s how much of your income the lender will count. Your mortgage income includes salary, overtime, commissions, rental cash flow and even certain state benefits. Lenders add these up, apply a Debt‑to‑Income (DTI) ratio, and decide the loan amount you qualify for.

Calculate Your Real DTI Ratio

Take your gross monthly earnings and divide all recurring debts – credit cards, car loans, student loans – by that number. Most banks cap DTI around 36 % for a conventional mortgage, though some high‑ratio products stretch to 45 % with strong credit scores. For example, a £3,500 monthly income with £800 in total debt gives a DTI of 23 %, leaving room for a larger mortgage payment.

Boost Your Mortgage Income Profile

Got a part‑time gig or freelance work? Keep detailed records and show stable earnings for at least two years – lenders love consistency. If you expect a bonus, ask for a letter from your employer confirming its regularity. Also, pay down high‑interest debt before you apply; a lower DTI instantly improves the loan size you can get.

Self‑employed borrowers often face extra paperwork, but the payoff is worth it. Provide tax returns, profit‑and‑loss statements and a clear business bank trail. Some lenders apply a 75 % factor to self‑employment income, but if you can prove higher net profit, you may get the full amount counted.

Don’t forget non‑salary income that counts. Rental properties, government benefits like Universal Credit, and even certain pensions can be added to the income pool. Always check the lender’s policy – some only include a portion, like 50 % of rental cash flow, to protect against vacancies.

Once you know your total qualifying income, use a mortgage calculator to see realistic price ranges. Plug in current interest rates (6‑8 % in 2025) and aim for a monthly payment that stays under 30 % of your gross income for comfort. This keeps you from stretching too thin and reduces the chance of payment shock if rates rise.

Finally, shop around. Different banks apply slightly different DTI thresholds and income multipliers. A credit‑unions may be more flexible with self‑employment income, while larger lenders might offer better rates for higher DTI borrowers. Getting multiple quotes gives you leverage and helps you pick the most affordable deal.

Understanding how your earnings translate into mortgage capacity puts you in control. By cleaning up debt, documenting all income streams, and comparing offers, you can secure a loan that fits your budget and moves you closer to the right home.