Where this figure comes from
Your income, debts, and housing costs run through the GDS/TDS ratios at the current qualifying rate.
Why this is not your budget
It is a mathematical ceiling. Compare it with what your budget absorbs once taxes, heating, and your other expenses are paid.
What no lender has confirmed yet
It confirms neither the income a lender will use, nor your credit, the property, or mortgage insurance. No lender has said yes yet.
A worked example
Gross income of $100,000, debts of $400 a month, taxes of $250 and heating of $100 a month, a 4.5% rate over 25 years. The lender tests the loan at 6.5% (the higher of 5.25% and your rate plus 2 points). The GDS ratio (39%) limits the payment to $2,900 a month, which gives a maximum loan of about $433,000. Add your down payment to get an approximate purchase price.
Common questions
Why does the calculation use a higher rate than mine? Lenders check that you could still pay if rates rose. That is the qualifying rate: the higher of 5.25% and your rate plus 2 points. Your actual payment is still calculated at your rate. Is this the amount a lender will approve? No, it is a planning estimate. A lender applies its own criteria (income stability, credit, property type). A preapproval confirms the actual amount.
Next step
Send me the ceiling you got and your approximate income: I’ll tell you what price stays comfortable for your budget.