By Cole Simmons, Sr. Loan Officer, NMLS #1127011 · Published October 20, 2026 · Updated October 26, 2026
The short answer: what you can afford (how much home, in other words) is the lowest of three numbers. Underwriting sets the most you can borrow, mostly through your debt-to-income ratio. Your savings set the cash you can bring to closing. And your own budget sets the payment you'll actually be comfortable with.
Most online calculators guess at the parts of the payment that hit Colorado buyers hardest: property taxes and homeowners insurance. Below is the math I actually use, the official limits for VA, FHA, and conventional loans side by side, and a free Colorado Springs affordability calculator that runs your numbers with your own interest rate.
What is debt-to-income, and why does it decide so much?
Here's the official definition from the Consumer Financial Protection Bureau:
"Your debt-to-income ratio (DTI) is all your monthly debt payments divided by your gross monthly income. This number is one way lenders measure your ability to manage the monthly payments to repay the money you plan to borrow."
Lenders look at two versions of it:
- Front-end ratio (housing ratio): your new monthly housing payment divided by gross monthly income. HUD calls this the Total Mortgage Payment to Effective Income Ratio, or PTI (HUD Handbook 4000.1 II.A.5.d.viii).
- Back-end ratio (total DTI): the housing payment plus your other monthly debts, divided by gross monthly income.
Two details trip people up. First, the new house payment counts in full. Fannie Mae's total monthly obligation includes the qualifying payment for the new mortgage plus other long-term and significant short-term monthly debts (Fannie Mae Selling Guide B3-6-02). Second, DTI uses debts, not spending. Car loans, student loans, credit card minimums, and child support usually count. Groceries, daycare, and gas don't (Fannie Mae Selling Guide B3-6-05). That's why "what the lender approves" and "what feels comfortable" can be far apart.
What goes into a Colorado Springs housing payment?
The payment lenders qualify you on is more than principal and interest. HUD's Total Mortgage Payment includes principal and interest, real estate taxes, hazard insurance, flood insurance if it applies, MIP, and HOA or condominium fees, among other items (HUD Handbook 4000.1 II.A.5.d.vii). Fannie Mae uses the full PITIA (principal, interest, taxes, insurance, and association dues) for a principal residence (Fannie Mae Selling Guide B3-6-02).
Here's how I estimate the two Colorado pieces before we have a real tax bill and a real insurance quote:
- Property taxes: 0.5% of the home's value per year. That's Colorado's 2024 effective property tax rate on owner-occupied homes, as published by the Tax Foundation from U.S. Census data (Tax Foundation, Property Taxes by State and County, 2026). It's a statewide average, so treat it as a starting point. For context, the Tax Foundation's 2024 effective rate for El Paso County is 0.45% (an El Paso County estimate); I plan with 0.5% because homes in metro districts often run higher.
- Homeowners insurance. 0.6% of the price per year is my Colorado planning rule, not a quote or a state average. Hail and wildfire risk push many Front Range premiums well above that, so replace it with a real quote for the address as early as you can. A higher premium raises your payment and lowers the price you can afford.
What that means in practice: together, those two estimates add about 1.1% of the purchase price per year to your housing costs, before principal, interest, mortgage insurance, or HOA dues. Because both are a percent of price, they rise with every step up in price range. The calculator does this math with the price you enter.
Both figures are estimates. Before you write an offer, pull the actual tax history from the El Paso County Treasurer and El Paso County Assessor, and get an insurance quote on the specific address.
What are the VA, FHA, and conventional DTI limits?
Each program measures affordability differently. These are the published guidelines, with the official source for each.
| Guideline | VA | FHA | Conventional (Fannie Mae) |
|---|---|---|---|
| Front-end (housing) ratio | None. VA uses total DTI plus residual income | 31% for manual underwriting with no compensating factors; 37% with one; 40% with two, or 40/40 with no discretionary debt (credit score of 580 or above for any stretch) | No separate housing-ratio cap listed in B3-6-02 |
| Back-end (total DTI) | 41% benchmark. Above it, the file needs a written justification unless residual income beats the guideline by at least 20% | 43% for manual underwriting with no compensating factors; 47% with one; 50% with two | 36% for manual underwriting; up to 45% when the borrower meets the credit score and reserve requirements in Fannie Mae's Eligibility Matrix; up to 50% through Desktop Underwriter |
| Residual income test | Yes. Colorado uses VA's West-region table, reduced 5% for many military borrowers | Can count as a compensating factor in manual underwriting | Not part of the Selling Guide DTI test |
| Mortgage insurance or fee | One-time VA funding fee, with exemptions for veterans receiving service-connected disability compensation | Upfront MIP plus an annual MIP paid monthly | Private mortgage insurance generally required when the loan is a higher share of the home's value; Fannie Mae sets those rules |
| Official source | VA Pamphlet 26-7, Ch. 4; VA.gov funding fee | HUD Handbook 4000.1 II.A.5.d.viii and II.A.2.e | Selling Guide B3-6-02; B7-1-01 |
A few notes on reading that table:
- FHA's ratio matrix is for manually underwritten loans. Borrowers with a minimum decision credit score of 500–579, or no score, can't exceed 31/43 on a manual file. Energy-efficient homes can use stretch ratios of 33/45. The higher tiers require specific compensating factors, such as verified cash reserves, a minimal increase in housing payment, or residual income (HUD Handbook 4000.1 II.A.5.d.viii).
- Files approved by FHA's automated TOTAL Mortgage Scorecard aren't scored against that manual matrix, but HUD requires the lender to downgrade an Accept to manual underwriting in specific cases, such as $1,000 or more in disputed derogatory credit accounts (HUD Handbook 4000.1 II.A.4.a.v).
- Fannie Mae's 36% and 45% are manual-underwriting limits. For loan casefiles run through Desktop Underwriter, the maximum allowable DTI is 50% (Fannie Mae Selling Guide B3-6-02).
- VA treats DTI as secondary. The VA Lenders Handbook says the ratio "is a guide and, as an underwriting factor, it is secondary to the residual income" (VA Pamphlet 26-7, Chapter 4).
How your file is underwritten changes which limit applies. Those are ceilings, not targets.
Is the 28% rule a real lending limit?
You'll see a 28% front-end ratio quoted as what "most conventional lenders want." It's a common rule of thumb, but it isn't in Fannie Mae's DTI guidance. B3-6-02 sets maximums on the total DTI ratio (36%, 45%, and 50%, depending on how the loan is underwritten) and doesn't list a separate housing-ratio cap (Fannie Mae Selling Guide B3-6-02). FHA's 31% is real, but it's HUD's starting point for manual underwriting, not a ceiling for every file (HUD Handbook 4000.1 II.A.5.d.viii). And VA doesn't use a front-end ratio at all.
Using the wrong ratio can make a buyer think they qualify for less, or more, than they really do.
How does VA residual income work in Colorado?
Residual income is the money left each month after taxes, housing, and debts. VA defines it as "the amount of net income remaining (after deduction of debts and obligations and monthly shelter expenses) to cover family living expenses" (VA Pamphlet 26-7, Chapter 4). The guideline varies by loan size, family size, and region. Colorado is in VA's West region, along with Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.
VA residual income guidelines, West region (monthly) (VA Pamphlet 26-7, Chapter 4, Tables 9 and 10):
| Family size | Loan amount $79,999 and below | Loan amount $80,000 and above |
|---|---|---|
| 1 | $425 | $491 |
| 2 | $713 | $823 |
| 3 | $859 | $990 |
| 4 | $967 | $1,117 |
| 5 | $1,004 | $1,158 |
| Over 5 | Add $75 for each additional member, up to a family of seven | Add $80 for each additional member, up to a family of seven |
How the math works on VA's loan analysis:
- Start with gross monthly income and subtract federal and state/local income taxes and FICA (Social Security plus Medicare).
- Subtract shelter expenses: principal and interest, taxes, insurance, HOA dues, and maintenance and utilities. VA estimates maintenance and utilities at 14¢ per square foot of gross living area per the appraisal, per month. VA's own example counts the living area only, not an unfinished basement (VA Pamphlet 26-7, Chapter 4).
- Subtract monthly debts and job-related costs such as child care.
- Compare what's left to the table. Count every member of the household, including a spouse who isn't on the loan. The lender may leave out someone fully supported by verified income that isn't used in the loan analysis (VA Pamphlet 26-7, Chapter 4).
The military adjustment. VA's handbook says to "Reduce the residual income figure (from the above tables) by five percent if: the borrower(s) is an active duty or retired serviceperson, or there is a clear indication that a borrower will receive the benefits resulting from use of military-based facilities located near the property" (VA Pamphlet 26-7, Chapter 4; see also 38 CFR 36.4340(e)). That can include many Fort Carson, Peterson, Schriever, and Academy buyers. For a West-region family of four with a loan amount of $80,000 or more, that's $1,061.15 instead of $1,117. VA's guidance doesn't spell out whether the 20% cushion uses the reduced figure ($1,061.15 × 1.2 = $1,273.38) or the table figure ($1,340.40). Your VA underwriter decides.
Example: a family of four buying in Colorado Springs with a loan amount of $80,000 or more needs at least $1,117 a month in residual income. If their DTI is above 41%, residual income of at least $1,340.40 a month (20% above $1,117) means VA doesn't require the supervisor-signed justification statement it otherwise expects for a ratio above 41%. Residual income above the guideline but short of that cushion can still be approved, with the supervisor's written justification (VA Pamphlet 26-7, Chapter 4; 38 CFR 36.4340(c)).
For military families, residual income often matters as much as DTI. Bring your LES and orders to our first conversation, and see VA loans in Colorado Springs.
Do disabled veterans pay the VA funding fee?
The VA funding fee is a one-time payment on a VA-backed or VA direct home loan. You can pay it at closing or finance it into the loan. But VA waives it for many veterans with a service-connected disability. From VA.gov:
"You won’t have to pay a VA funding fee if any of these descriptions are true for you: - You’re receiving VA compensation for a service-connected disability, or - You’re eligible to receive VA compensation for a service-connected disability, but you’re receiving retirement or active-duty pay instead"
VA also lists exemptions for surviving spouses receiving Dependency and Indemnity Compensation, service members with a qualifying pre-discharge rating, and active-duty Purple Heart recipients. If you're later awarded compensation retroactive to before your closing date, you may be eligible for a refund (VA.gov). We'll confirm your funding fee status early.
How does FHA mortgage insurance work?
FHA loans carry two kinds of mortgage insurance premium. In HUD's words:
"FHA collects a one-time Upfront Mortgage Insurance Premium (UFMIP) and an annual insurance premium, also referred to as the periodic or monthly MIP, which is collected in monthly installments."
FHA loans include an upfront mortgage insurance premium set by HUD; see the HUD Handbook 4000.1, II.A.2.e and Appendix 1.0 for the current rate. HUD lets the upfront premium be financed into the loan or paid in cash at closing. The annual premium is paid monthly and counts in your housing payment for both ratios. Your Loan Estimate will show the actual premiums for your file. More on FHA: FHA and USDA loans.
How does conventional PMI work?
Conventional loans generally require private mortgage insurance when the loan is a higher share of the home's value; Fannie Mae sets those rules (Fannie Mae Selling Guide B7-1-01). Premiums can be paid monthly, annually, as a single premium at closing, or as a split premium (Fannie Mae Selling Guide B7-1-01). Your Loan Estimate shows whether it applies and how it's paid.
Two things to know from the CFPB: PMI protects the lender, not you, and the most common way to pay it is a monthly premium added to your mortgage payment (CFPB: What is private mortgage insurance?). Because it's added to your mortgage payment, it raises your housing payment, and with it both ratios.
How do the limits compare on the same income?
For each program, your maximum housing budget is the lower of two numbers: the front-end limit × your gross monthly income, and the back-end limit × your gross monthly income minus your other monthly debts. With no other debts, FHA's 31% front-end limit binds first; with heavy debts, the back-end limit binds first; for VA, residual income can decide. Run your own numbers, at your own quoted rate, in the Colorado Springs affordability calculator.
What does cash to close include?
Your Loan Estimate shows an Estimated Cash to Close. The CFPB explains that it includes your down payment and closing costs, minus any deposit you've already paid to the seller, any seller credits toward closing costs, and other adjustments (CFPB: Loan Estimate explainer). Plan for earnest money once you're under contract, inspection and appraisal fees that are often paid before closing, prepaids and escrow for taxes and insurance, and moving costs. For a line-by-line breakdown, see the mortgage cash to close guide.
If cash is the tight spot, ask about Colorado assistance. CHFA offers homeownership programs through participating lenders, and eligibility rules apply (CHFA homeownership programs). For conventional loans on a home you'll live in, Fannie Mae allows gifts from acceptable donors toward the down payment, closing costs, or reserves, with documentation (Fannie Mae Selling Guide B3-4.3-04).
Some files also need reserves, which are assets you still have after closing, measured in months of the new housing payment (Fannie Mae Selling Guide B3-4.1-01). Even when they aren't required, I encourage buyers not to drain every account to close.
What changes the math in Colorado Springs?
Property taxes vary by address, not just by price. Many newer neighborhoods sit inside metropolitan districts or other special districts that levy their own property taxes. Colorado requires a bold special-taxing-district disclosure in every residential purchase contract, and it tells buyers to check with the county treasurer and review the certificate of taxes due (C.R.S. 38-35.7-101). The state's Division of Local Government has a plain-English guide for residents (DOLA: Special districts, a brief review for residents). Two homes at the same price in different parts of town can carry very different tax bills.
HOA dues count in DTI. They're part of the housing payment, so they shrink your budget the same way a higher tax bill does.
Insurance can change late. Get the quote before your inspection deadline, not the week of closing, so a surprise premium doesn't change your ratios at the last minute.
New debt before closing can force a re-review. Fannie Mae requires a loan to be re-underwritten if new debt or reduced income pushes the DTI ratio past its tolerances before closing (Fannie Mae Selling Guide B3-6-02). Hold off on that furniture financing until after you have the keys.
How do I find the payment I'll actually be comfortable with?
Start with your real spending, not the lender's maximum. The CFPB offers a step-by-step guide to setting a home-price budget (CFPB: Prepare to shop for a home). Then run your numbers in the Colorado Springs affordability calculator, and compare that comfortable payment to what the lender approves. If the approval is higher, that's room to breathe, not an instruction to spend it.
For how pricing works, and why I don't publish sample rates, see how mortgage rates are quoted.
Frequently asked questions
What front-end ratio do lenders use for a Colorado Springs home?
It depends on the loan program. For manually underwritten FHA loans, HUD's limit starts at 31% and can reach 37% or 40% with compensating factors (HUD Handbook 4000.1 II.A.5.d.viii). VA doesn't use a front-end ratio; it uses a 41% debt-to-income benchmark together with residual income (VA Pamphlet 26-7, Chapter 4). Fannie Mae's Selling Guide sets total DTI maximums of 36%, 45%, and 50% and doesn't list a separate housing-ratio cap (Fannie Mae Selling Guide B3-6-02).
How much should I budget for homeowners insurance in Colorado Springs?
0.6% of the price per year is my Colorado planning rule, not a quote or a state average. Hail and wildfire risk push many Front Range premiums well above that, so replace it with a real quote for the address as early as you can. A higher premium raises your payment and lowers the price you can afford.
What property tax rate should I use for a Colorado Springs estimate?
My calculator starts with 0.5% of the home's value per year, which is the Tax Foundation's 2024 effective property tax rate for Colorado (Tax Foundation). It's a statewide average. Metro districts and other special districts can push a specific address higher, so check the actual bill with the El Paso County Treasurer.
What is the VA residual income requirement for a family of four in Colorado?
Colorado is in VA's West region. For loan amounts of $80,000 and above, the West-region guideline for a family of four is $1,117 a month. For loan amounts of $79,999 and below, it's $967 a month. VA reduces the guideline by 5% for active-duty or retired service members, or when the borrower will clearly benefit from nearby military facilities. For a family of four, that's $1,061.15 instead of $1,117 (VA Pamphlet 26-7, Chapter 4; 38 CFR 36.4340(e)). Every member of the household counts toward family size.
Do disabled veterans pay the VA funding fee?
Not if they're receiving VA compensation for a service-connected disability. VA also exempts veterans who are eligible for that compensation but receive retirement or active-duty pay instead, along with a few other groups (VA.gov: VA funding fee and loan closing costs). We'll confirm your status early in the file.
Does FHA mortgage insurance count in my debt-to-income ratio?
Yes. HUD's Total Mortgage Payment for qualifying includes principal and interest, real estate taxes, hazard insurance, MIP, and HOA fees, among other items (HUD Handbook 4000.1 II.A.5.d.vii).
When does a conventional loan need private mortgage insurance?
Conventional loans generally require private mortgage insurance when the loan is a higher share of the home's value; Fannie Mae sets those rules (Fannie Mae Selling Guide B7-1-01). Your Loan Estimate shows whether it applies to you. The CFPB notes that PMI protects the lender, not you (CFPB: What is private mortgage insurance?).
Does my spouse's income have to be on the loan?
Only income from people on the loan is used to qualify. For VA, though, residual income counts every member of the household, including a spouse who isn't on the loan, unless they're fully supported by verified income that isn't used in the loan analysis (VA Pamphlet 26-7, Chapter 4). We'll look at both ways to structure it.
Can I buy before I sell my current home?
Sometimes. Fannie Mae counts a bridge loan as a monthly debt unless the current home is under a fully executed contract with financing contingencies cleared (Fannie Mae Selling Guide B3-6-05). We'll map which path fits your timeline.
Want your real number, not a calculator's?
Tell me your income, debts, savings, and the neighborhoods you're watching. I'll show you what you can qualify for under each program, what cash you'll really need, and where your comfort zone sits, before you start touring.
Start a secure application. Applying doesn't commit you to a loan. Use the mortgage preapproval checklist to gather documents. You can also call or text (660) 229-0219 or email csimmons@edgehomefinance.com.
Related guides: Mortgage preapproval checklist · Mortgage cash to close guide · VA loans in Colorado Springs · FHA and USDA loans · First-time homebuyer in Colorado Springs · Conventional vs FHA vs VA · How mortgage rates are quoted · Colorado Springs mortgage broker · Pre-qualified vs pre-approved vs underwritten
Sources (checked October 26, 2026): CFPB: What is a debt-to-income ratio? · CFPB: What is private mortgage insurance? · CFPB: Loan Estimate explainer · CFPB: Prepare to shop for a home · Fannie Mae Selling Guide B3-6-02 · Fannie Mae Selling Guide B3-6-05 · Fannie Mae Selling Guide B7-1-01 · Fannie Mae Selling Guide B3-4.1-01 · Fannie Mae Selling Guide B3-4.3-04 · HUD Handbook 4000.1 (PDF, issued August 12, 2026) · HUD Handbook 4000.1 information page · VA Pamphlet 26-7, Chapter 4: Credit Underwriting · VA.gov: VA funding fee and loan closing costs · 38 CFR 36.4340 (VA underwriting standards) · Tax Foundation: Property Taxes by State and County, 2026 · CHFA homeownership · C.R.S. 38-35.7-101 · DOLA special districts guide · El Paso County Treasurer · El Paso County Assessor. The 0.6% insurance figure is my Colorado planning rule, not a published guideline, a state average, or a quote. Property tax and insurance are shown as annual percentages of price only; this page does not show sample payments. Program rules change; confirm current guidance before you rely on it.
Cole Simmons, Sr. Loan Officer · NMLS #1127011 · Edge Home Finance, LLC · Company NMLS #891464 · (660) 229-0219 · Equal Housing Opportunity. Licensed in AZ, CA, CO, FL, GA, IL, KS, MO, NC, OK, OR, PA, TN, TX. Verify at NMLS Consumer Access: Cole Simmons #1127011 · Edge Home Finance, LLC #891464. State licensing information and required disclosures: Edge Home Finance, LLC licensing. All loans are subject to credit, property, and underwriting approval. Program availability and requirements vary by state and lender and may change. Not all applicants qualify. Cole Simmons and Edge Home Finance are not affiliated with or endorsed by the Department of Veterans Affairs, HUD/FHA, CHFA, Fannie Mae, Freddie Mac, or any military installation. This article is general information, not a commitment to lend.