How much a bank will loan you for a house comes down to four things working at once: your income measured against your existing monthly debts, your credit profile, the cash you can put down, and federal caps that limit the size of most mortgages. For 2026, the baseline conforming loan limit is $832,750 in most counties,1Federal Housing Finance Agency (FHFA). FHFA Announces Conforming Loan Limit Values for 2026 but the number that matters to you is smaller and more personal: whatever monthly payment fits inside a debt-to-income ratio your lender will accept at today’s interest rate.
The Math That Produces Your Loan Amount
Lenders start with your gross monthly income and compare it to your monthly debts. That comparison is your debt-to-income ratio, and it comes in two forms.
The front-end ratio counts only housing costs: principal, interest, property taxes, and homeowners insurance. Most lenders want that at or below 28% of gross monthly income. The back-end ratio adds everything else you owe each month, including car payments, student loans, and credit card minimums.2Federal Deposit Insurance Corporation (FDIC). Loans and Mortgages – How Much Mortgage Can I Afford The traditional back-end target is 36%.
Here’s where borrowers underestimate themselves. Fannie Mae’s automated underwriting system, Desktop Underwriter, approves conventional loans with back-end ratios as high as 50% when the rest of the risk profile supports it. Manual underwriting caps out at 45% with compensating factors like significant cash reserves.3Fannie Mae. Debt-to-Income Ratios Someone earning $10,000 per month with $1,000 in existing debts could qualify for a mortgage payment as high as $4,000 under the 50% threshold, well above the $2,600 the 28/36 rule suggests.
The federal qualified mortgage rule once imposed a hard 43% DTI cap. The Consumer Financial Protection Bureau replaced that with a price-based test tied to the loan’s annual percentage rate.4Consumer Financial Protection Bureau. CFPB Issues Two Final Rules to Promote Access to Responsible Affordable Mortgage Credit Lenders still evaluate your DTI, but the rule no longer draws a bright line.5eCFR. 12 CFR 1026.43 – Minimum Standards for Transactions Secured by a Dwelling
So use 28/36 to decide what you can comfortably afford. Use 45% to 50% as the outer edge of what a bank might actually approve.
How Interest Rates Change the Number
Your loan amount is not just income minus debts. Whatever monthly payment fits inside your DTI has to cover both interest and principal, and the rate determines how those split. Higher rates mean more of the payment goes to interest, so the loan itself has to be smaller.
A working rule: for every half-percentage-point rise in interest rates, you lose roughly $5,000 to $6,000 in borrowing capacity per $100,000 of loan. On a $400,000 mortgage, a half-point jump costs you $20,000 to $25,000 in purchasing power. Two buyers with identical incomes and credit can qualify for very different loan amounts depending on when they lock their rate.
This is also why pre-approval letters are time-limited. The number your lender quotes today assumes today’s rate. If rates climb before you close, the lender may cut the amount they’ll fund unless you locked in advance. A rate lock typically holds your rate for 30 to 60 days.6Consumer Financial Protection Bureau. What Is a Lock-In or a Rate Lock on a Mortgage
How Credit Score Feeds Back Into the Amount
Your credit score does not directly set a maximum loan figure, but it controls which loan products you qualify for and what rate you’re offered. Since the rate drives the monthly payment, a lower score indirectly shrinks how much house you can borrow for.
For FHA loans, the cutoffs are clear. A score of 580 or above qualifies for the standard 3.5% down payment. A score between 500 and 579 requires 10% down. Below 500, FHA financing is not available.7U.S. Department of Housing and Urban Development (HUD). Mortgagee Letter 10-29 – Manual Underwriting and Credit Score Requirements
Conventional loans through Fannie Mae no longer carry a blanket 620 minimum. As of November 2025, the automated underwriting system evaluates the full risk profile rather than applying a hard score cutoff.8Fannie Mae. Selling Guide Announcement SEL-2025-09 Individual lenders still impose their own overlays, so you’ll often see 620 or 640 floors in practice. Applying to more than one lender is the fastest way to find out where your score actually lands.
Credit score also drives the cost of private mortgage insurance if you put down less than 20%. On a $270,000 loan, a borrower above 740 might pay $45 to $68 per month in PMI. A borrower in the 620 to 660 range could pay $169 to $338 per month for the same coverage. That extra cost sits inside your monthly housing payment, which is what the lender measures against your DTI. Higher PMI, lower approvable loan.
Down Payment and the Appraisal Ceiling
Cash sets a separate ceiling on your purchase price. If a lender requires 20% down on a conventional loan, $100,000 in savings caps your purchase at $500,000 regardless of what your income could otherwise support. Even with a smaller down payment, the lender still calculates the loan-to-value ratio (the loan amount divided by the appraised home value) and adjusts terms accordingly.
Appraisal is the constraint most first-time buyers don’t see coming. If a home appraises below your agreed purchase price, the lender bases loan-to-value on the lower appraised figure. You then have to cover the gap in cash or renegotiate the price. In competitive markets where bidding wars push offers above comparable sales, this happens more often than buyers expect.
The 2026 Federal Loan Limits
Federal agencies set hard ceilings that apply on top of your personal qualifying number. Most mortgages are “conforming” loans sold to Fannie Mae or Freddie Mac, and those agencies buy only mortgages below specific dollar thresholds.
For 2026, the baseline conforming loan limit is $832,750 for a single-unit property in most counties. In designated high-cost areas, the ceiling rises to $1,249,125. Alaska, Hawaii, Guam, and the U.S. Virgin Islands sit at a separate ceiling of $1,873,675.1Federal Housing Finance Agency (FHFA). FHFA Announces Conforming Loan Limit Values for 2026 Anything above your county’s limit becomes a jumbo loan, which usually requires a larger down payment, stronger credit, and carries a higher rate.
FHA loans have their own ceilings. The 2026 national floor for a single-unit FHA mortgage is $541,287 in low-cost areas, and the high-cost-area cap matches the conforming figure at $1,249,125.9U.S. Department of Housing and Urban Development (HUD). HUD Federal Housing Administration Announces 2026 Loan Limits Your specific county falls somewhere in that range based on local home prices.
VA home loans work differently. With full entitlement, there is no loan limit. You can borrow whatever a lender approves based on income and credit, with no down payment required. Veterans with partial entitlement are subject to the FHFA conforming figures for their county.10U.S. Department of Veterans Affairs. VA Home Loan Entitlement and Limits
Zero-Down Programs That Change the Answer
Two federal programs eliminate the down payment barrier entirely for buyers who qualify.
VA loans, available to eligible veterans and active-duty service members, require no down payment and no private mortgage insurance. For qualified borrowers with full entitlement, this often produces the highest possible purchase price because no cash goes to a down payment or PMI.10U.S. Department of Veterans Affairs. VA Home Loan Entitlement and Limits
USDA guaranteed loans offer zero-down financing in eligible rural and suburban areas. The trade-off is an income ceiling: your household income cannot exceed the moderate-income limit for your county, generally 115% of the area median.
If You’re Self-Employed
Self-employed income is the most complicated variable in the calculation. A salaried worker’s qualifying income is essentially their gross pay. A self-employed borrower’s qualifying income is whatever the lender calculates after analyzing tax returns, and that number is almost always lower than what the borrower thinks they earn.
Fannie Mae generally requires two full years of self-employment history before business income qualifies. The lender reviews personal and business tax returns for those two years and calculates net qualifying income after deductions, depreciation, and write-offs.11Fannie Mae. Underwriting Factors and Documentation for a Self-Employed Borrower If income dropped from year one to year two, expect the lender to use the lower figure or average the two.
There’s a narrow exception. If your business has existed for at least five years and you’ve held at least a 25% ownership stake for all five, a lender may accept one year of returns.11Fannie Mae. Underwriting Factors and Documentation for a Self-Employed Borrower For everyone else, the two-year requirement means your 2024 and 2025 federal returns need to be filed before applying in 2026.
Turning the Estimate Into a Pre-Approval
Pre-approval is where every one of these variables collapses into a single dollar figure. The lender pulls your credit report, reviews your documentation, runs your profile through underwriting, and issues a letter stating the maximum loan amount they’ll fund. That letter is what sellers want to see before they take your offer seriously.
Most pre-approval letters are valid for 60 to 90 days, though some lenders issue them for as short as 30 days. If yours expires before you find a home, the lender re-verifies income and pulls a fresh credit report, which puts another hard inquiry on your file. Get pre-approved when you’re genuinely ready to start making offers, not before.
The pre-approval number can still shift at closing. If verified income comes in lower than expected, or the appraisal falls short, or rates move before you lock, the final loan amount may not match the letter. Treat pre-approval as a well-informed ceiling, not a guarantee.