Home Affordability Calculator (Self-Employed)

Most affordability calculators ask for your salary. Freelancers don't have one — and the number a lender uses is not the number on your invoices. This one starts from Schedule C net profit.

By The PiggyMath Editorial Desk Last updated August 6, 2026 ✓ Independently verified against published IRS figures

How this is calculated

Qualifying income is Schedule C net profit plus non-cash add-backs, averaged over two years — or the lower recent year when income declined. Maximum housing payment = (monthly income × DTI limit) − existing debt payments. Subtract taxes and insurance to get principal and interest, then invert the amortization formula: L = P × (1 − (1+r)⁻ⁿ) / r. Add your down payment for the price.

Worked example: profits of $78,000 then $86,000 average to $82,000, or $6,833/month. At 43% that allows $2,938 of total debt; less $450 of existing payments and $400 of tax and insurance leaves $2,088 of principal and interest — about $330,000 of loan at 6.5% over 30 years, or $370,000 of house with $40,000 down.

Your income, the way a lender reads it

Schedule C net profit — earlier year ($)

Schedule C net profit — most recent year ($)

Annual add-backs: depreciation, depletion, one-offs ($)

Other monthly debt payments — cards, car, student loans ($)

The purchase

Down payment ($)

Mortgage rate (%)

Loan term

Property tax + insurance + HOA, per year ($)

Back-end DTI limit (%) 43% is the conventional ceiling · FHA often stretches to 50%

Home price you can support

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Qualifying monthly income

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Max housing payment

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Max loan amount

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What the lender is checking

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Where your income goes

At the maximum the lender would allow

The number that surprises freelancers

If you invoiced $140,000 last year and deducted $45,000 of legitimate business expenses, a mortgage underwriter does not see $140,000. They see $95,000 — the net profit at the bottom of Schedule C. Every deduction that saved you tax in April also lowered the income you can borrow against. This is the single biggest reason self-employed applicants are quoted a smaller loan than they expected, and it is why the calculator above asks for net profit rather than revenue.

There is no way around it, only around the timing. If a mortgage application is eighteen months out, aggressive expensing in the meantime works directly against the loan. That is a real trade-off with no clean answer: the deductions are worth roughly 25 to 40 cents on the dollar in tax, while the borrowing capacity they cost you is worth several times the deduction in purchase price. Which matters more depends entirely on whether you are buying.

Two years, and the trend matters

Fannie Mae's guide asks lenders to obtain a two-year history of earnings and to analyse "year-to-year trends for gross income, expenses, and taxable income" before deciding what income is stable enough to count. It does not lay down a formula. In practice, when the two years are similar or rising, underwriters average them; when the most recent year is lower, the conservative figure is the one they can defend in writing, which is usually the lower recent year. The calculator follows that convention and tells you when it has done so.

This is why a strong year followed by a weak one is worse for borrowing than two mediocre years. If your most recent year is the weak one, and there is a reason for it that has since resolved, that explanation belongs in the file early rather than as a response to a query.

What you can legitimately add back

Not every Schedule C expense is a cash expense. Depreciation and depletion reduce your taxable profit without any money leaving your account, so lenders add them back when calculating qualifying income — that is precisely what the cash-flow analysis on Fannie Mae's Form 1084 is for. Genuinely non-recurring expenses can sometimes be added back too, though you will need to show they were one-offs. Business use of home and the meals disallowance are also commonly added back. If you took Section 179 on a large purchase, that is an add-back worth thousands of dollars of borrowing capacity — put it in the field above.

43% is a convention, not a law

The 43% debt-to-income figure repeated everywhere comes from the original Qualified Mortgage rule — and the CFPB removed it in 2020, replacing the DTI ceiling with price-based thresholds. What remains are the individual investors' own limits: Fannie Mae's automated underwriting allows up to 50%, manual underwriting starts at 36% and stretches to 45% with reserves and a strong credit score, and FHA's manual limits are 31% front-end and 43% back-end, reaching 50% with compensating factors. Move the slider and you can see how much difference a lender's appetite makes — often more than an entire year of income.

The back-end ratio counts your total monthly debt: the new mortgage principal, interest, taxes, insurance and HOA, plus car payments, student loans, minimum credit-card payments and anything else on your credit report. It does not count utilities, groceries, health insurance premiums or income tax — which is exactly why the maximum a lender approves and the amount you can comfortably pay are two different numbers. For a freelancer paying quarterly estimates out of the same account, that gap is wide. Run your quarterly tax figure alongside this and subtract it before you decide what is affordable.

What the calculator does not include

Mortgage insurance is not modelled here — with less than 20% down, PMI adds roughly 0.5% to 1.5% of the loan amount per year and eats directly into the housing payment, so the price shown will be optimistic. Our mortgage calculator handles PMI and gives you the full amortization once you have a price in mind. Closing costs, typically 2% to 5% of the purchase price, also come out of the same savings as your down payment.

Frequently asked questions

How do lenders calculate income for self-employed borrowers?

From net profit on Schedule C, not gross revenue — with non-cash expenses such as depreciation and depletion added back. Fannie Mae asks for a two-year history and a written analysis of the trend; lenders typically average the two years, using Form 1084 or a similar cash-flow worksheet.

What if my income went down last year?

Fannie Mae's guide requires trend analysis rather than a fixed formula, but a declining trend means the underwriter has to justify whatever figure they use — so the defensible number is usually the lower, more recent year. Expect to provide a written explanation for the decline.

How much house can I afford on $100,000 of freelance profit?

At 43% back-end DTI, $450 of other monthly debt, 6.5% over 30 years and $4,800 a year of tax and insurance, that supports about $2,733 a month of principal and interest — roughly a $432,000 loan, or a $472,000 house with $40,000 down. Change any of those and the answer moves substantially; the rate alone shifts it by tens of thousands.

Do I need two years of tax returns?

Generally yes. Fannie Mae allows an exception where the most recent return shows a full 12 months of self-employment income and you can document prior earnings at the same or greater level in a related field.

Is 43% DTI still the limit?

Not legally. The CFPB removed the 43% DTI cap from the General QM definition in 2020 in favour of price-based thresholds. Fannie Mae's automated underwriting now allows up to 50%, and FHA reaches 50% with compensating factors.

Should I stop deducting business expenses before buying a house?

It's a real trade-off, not a trick. Deductions save you 25–40 cents per dollar in tax but reduce qualifying income roughly dollar for dollar, and every dollar of qualifying income supports several dollars of purchase price. Never claim expenses you didn't incur — but timing genuinely discretionary ones around an application is legitimate planning.

Sources

Every formula on this page is checked against an independent implementation before publication. How we check our math →