Getting a mortgage as a self-employed borrower runs on a different clock than a W-2 employee's. Instead of a single pay stub, lenders lean on two years of tax returns, average your net income across them, and apply the same debt-to-income math everyone else faces — just with more paperwork and less room for a lucky quarter to carry you. This calculator walks through that math directly: feed it your two-year average net income, your other monthly debts, and a target DTI ratio, and it estimates the home price you could plausibly qualify for at a given rate and term. It's US mortgage underwriting logic in miniature, not a substitute for talking to a loan officer.
How it works
Underwriters don't look at your gross 1099 revenue — they look at net income after business expenses, averaged over your last two years of tax returns (or a shorter 12-month window if your income is declining, since lenders use the worst-case trend). This calculator takes that two-year average, divides it by 12 to get a qualifying monthly income, and multiplies it by your target DTI percentage — the share of gross monthly income that all debt payments, including the future mortgage, are allowed to consume. Subtracting your other monthly debts (car payments, student loans, credit cards) from that ceiling leaves the maximum monthly principal-and-interest payment the mortgage itself can claim.
From there it's standard loan math: given that maximum payment, an interest rate, and a loan term, the calculator solves for the largest loan amount that amortizes to exactly that payment, using the standard present-value-of-an-annuity formula lenders and amortization tables both rely on. Add your down payment to that loan amount and you get an estimated maximum home price.
Worked example
Say your two-year average net income is $120,000, you carry $500 a month in other debt, you're targeting a 43% DTI, financing at 7% over 30 years, with a $60,000 down payment.
- Qualifying monthly income: $120,000 ÷ 12 = $10,000
- Max monthly payment: ($10,000 × 43%) − $500 = $4,300 − $500 = $3,800
- Monthly rate: 7% ÷ 12 = 0.5833%
- Max loan amount (360 payments of $3,800 at that rate): $571,168.76
- Max home price: $571,168.76 + $60,000 = $631,168.76
That $631K is the ceiling implied by this specific combination of income, debt, DTI target, rate, and term — nudge the DTI down to a more conservative 36%, or add a car payment, and the number drops fast, since the mortgage payment is what absorbs whatever room is left after other debts.
How to interpret your result
The max home price is a ceiling, not a target — it's what the numbers you entered allow, not what you should necessarily spend. The max monthly payment only covers principal and interest; it doesn't include property taxes, homeowners insurance, mortgage insurance, or HOA dues, all of which lenders fold into your real DTI and which will eat into the payment you can actually afford for the house itself. Build in room for those before treating this ceiling as a shopping budget.
This tool also doesn't touch the parts of self-employed underwriting that trip people up most: lender add-backs for depreciation and other non-cash deductions, credit score tiers, cash-reserve requirements (often 2–6 months of mortgage payments in the bank for self-employed applicants), or loan-program-specific DTI caps that can run higher or lower than the 43% used here. If your debts already exceed what your target DTI allows for on your qualifying income alone, the tool shows $0 borrowing power — a max loan amount of $0 and a max home price equal to whatever cash down payment you entered — rather than a negative number. That's a signal to pay down debt, raise income, or revisit the DTI target with a specific loan program in mind, not a hard stop.
This is a US-only estimate, not a pre-approval, a rate quote, or personalized financial advice. Actual qualifying income calculations, DTI limits, and rates vary by lender, loan program, and your full credit picture.
Methodology & sources
qualifyingMonthlyIncome = twoYearAvgNetIncome / 12; maxMonthlyPayment = qualifyingMonthlyIncome × (dtiPercent / 100) − otherMonthlyDebts; monthlyRate = interestRatePercent / 100 / 12; n = termYears × 12; maxLoanAmount = maxMonthlyPayment × (1 − (1 + monthlyRate)^−n) / monthlyRate (the standard mortgage amortization formula), or maxMonthlyPayment × n at a 0% rate; maxHomePrice = maxLoanAmount + downPayment.
The two-year net-income averaging approach and the 43% DTI benchmark reflect standard self-employed mortgage underwriting practice — see The Mortgage Reports' guide to getting a mortgage while self-employed for how lenders average net income across one or two years and the 43% DTI figure commonly applied. For general debt-to-income guidelines by loan type, see Bankrate's explainer on why DTI matters in mortgages. Every lender and loan program sets its own exact rules — confirm specifics with a mortgage professional before relying on this estimate.