Lenders size a DC mortgage on your debt-to-income ratio, your down payment, and the property's carrying costs. This post walks through that method step by step; to run it on your own numbers, use our affordability calculator.
Debt-to-income ratio: how lenders set your maximum loan
Lenders use your debt-to-income (DTI) ratio to determine your maximum loan amount. DTI is calculated as:
Total monthly debt payments ÷ Gross monthly income = DTI
Debts that count in DTI
- Proposed mortgage payment (principal, interest, taxes, insurance)
- HOA dues
- Student loan payments
- Car loan payments
- Credit card minimum payments
- Personal loans
- Child support or alimony
Expenses that do not count in DTI
- Utilities, food, transportation, subscriptions
- Health insurance premiums
- Retirement contributions
- Cell phone bills
Maximum DTI by loan type
| Loan Type | Maximum DTI |
|---|---|
| Conventional | 45% (up to 50% via automated underwriting) |
| FHA | 43% (up to 50% with compensating factors) |
| VA | No hard cap; lender overlays run 41-45% |
| Jumbo | 36-43% depending on lender |
How lenders turn DTI into a loan amount
Start with your gross monthly income and the DTI your loan type allows. Subtract your existing monthly debts. The result is your maximum total housing payment. From that, subtract the parts that are not principal and interest: DC property tax (0.85% of assessed value a year, less the homestead deduction), homeowner's insurance, and HOA dues if you are buying a condo. The remainder is the payment available for principal and interest, and the rate you qualify for converts that payment into a loan amount.
Run the last step on our calculator, and see today's rates.
Three DC-specific factors:
- HOA dues reduce the mortgage payment you can carry dollar for dollar. For that reason the same income qualifies for a higher-priced rowhouse than condo.
- DC property tax is 0.85% of assessed value a year. The homestead deduction ($91,950 off assessed value for tax year 2026) lowers the bill on an owner-occupied home.
- Property type sets the price range. As income rises, the options run from studios and one-bedroom condos, through two-bedroom condos and smaller rowhouses, to renovated rowhouses and larger condos. DC's reduced first-time buyer recordation tax and Tax Abatement lower the cash needed at closing; DC Open Doors (through DCHFA's participating lenders) and HPAP (through DHCD-certified housing counseling agencies) can add to the down payment for buyers who qualify.
Set a housing budget below the lender's maximum
Lenders approve on DTI, credit, assets and LTV. The approval does not account for:
- Savings goals: Retirement contributions, emergency fund building
- Lifestyle costs: Dining out, travel, hobbies, entertainment
- Future changes: Starting a family, career transitions, caring for parents
- Maintenance costs: 1-2% of home value annually for rowhouses
- DC cost of living: Budget for DC prices on food, transportation and services
Keep total housing cost under 30% of gross income
Set a total housing payment under 30% of gross income. Against a 40% lender maximum that is a quarter less payment, which puts the purchase price 15-25% below the lender-approved maximum and leaves room for savings and maintenance.
How HOA dues reduce the price you can afford
Each $100 of monthly HOA dues reduces the purchase price you qualify for by the same amount as a $100 higher mortgage payment. Put the building's actual dues into the calculator to see the effect on price.
Monthly costs of a DC rowhouse and a DC condo
| Factor | Rowhouse | Condo |
|---|---|---|
| HOA dues | None | Monthly, in the hundreds of dollars |
| Property tax | Higher (larger assessed value) | Lower |
| Insurance | Full homeowner's policy | Walls-in (HO-6) policy, cheaper |
| Maintenance | Self-funded — budget 1-2% of value a year | Exterior and common areas covered by the HOA |
At the same budget a rowhouse supports a higher purchase price, and the rowhouse owner pays for all maintenance. A condo HOA covers the exterior, common areas, and in some buildings water and trash.
Minimum down payment by loan type
Your savings set a ceiling on purchase price through the minimum down payment your loan allows:
- Conventional 3% down (97% LTV) is limited to first-time buyers, or to HomeReady/Home Possible borrowers at or below 80% of area median income, and only on loans up to the $832,750 conforming baseline
- High-balance conforming ($832,750 to $1,249,125 in DC) caps at 95% LTV
- FHA requires 3.5% down, and the whole down payment can be a gift from family; VA requires none
- Jumbo minimums are set by each investor, in the 10-20% range
$30,000 in savings covers the minimum down payment on a higher-priced home under a 3% program than under a 10% one, if you and the loan amount qualify. DC Open Doors (through DCHFA's participating lenders) and HPAP (through DHCD-certified housing counseling agencies) can cover part of the down payment for buyers within their income limits.
Quick affordability estimate
For a first estimate, multiply gross annual income by 3.5 to 4.5 to get a purchase price. Go lower if you carry significant debt and higher if you have a large down payment. Then confirm with the calculator.
Next steps
- Calculate your DTI: List all monthly debts and divide by gross monthly income
- Determine your comfortable payment: Target 30% of gross income for total housing cost
- Factor in HOA dues: If buying a condo, subtract estimated HOA from your budget first
- Account for DC costs: Recordation tax and closing costs add $10,000-$25,000 upfront
- Check DC programs: The reduced first-time buyer recordation tax (0.725% up to $777,000 in tax year 2026) and DC Tax Abatement ($576,000 cap) lower closing costs; DC Open Doors (through DCHFA's participating lenders) and HPAP (through DHCD-certified housing counseling agencies) help with the down payment
- Get pre-qualified: Your loan officer gives you a number based on your full file
See our DC mortgage guide or get pre-qualified. It takes two minutes and there is no credit pull.
