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"How much can I borrow?" is usually the first question anyone asks when they start thinking about buying a home. The answer sets your budget, shapes which areas you look in and decides how big a deposit you need. This guide explains how UK lenders work out what they'll lend and what you can do to improve your position.

For a quick estimate based on your income, deposit and commitments, use our how much can I borrow calculator.

Income multiples: the starting point

Most lenders begin with a multiple of your income. As a rough guide:

• 4 times income is a cautious figure many lenders will offer.
• 4.5 times income is typical for most borrowers.
• 5 to 5.5 times income is available from some lenders for higher earners or certain professions.

On a single income of £40,000, that's roughly £160,000 to £200,000, with £180,000 as a typical figure. For joint applications, lenders usually add the two incomes together.

The Bank of England limits how many new mortgages each lender can offer at 4.5 times income or more, so higher multiples are rationed and tend to go to stronger applicants.

What counts as income?

Basic salary always counts. Lenders may also include some or all of regular overtime, bonuses or commission if you can show a consistent history. Self-employed applicants usually need two or more years of accounts or tax calculations, and lenders typically use an average of recent years' profits or, for company directors, salary plus dividends.

Affordability checks

Income multiples are only part of the picture. Lenders must also check that the mortgage is affordable for you, which means looking at your outgoings:

• Credit commitments such as car finance, personal loans and credit card balances
• Household bills and regular spending
• Childcare and dependants
• Other obligations such as maintenance payments or student loan repayments

Every pound you spend on existing debt is a pound that can't go towards a mortgage. That's why the calculator reduces your borrowing when you add monthly loan and card payments. For example, £300 a month of car finance on a £40,000 income could cut a typical borrowing figure from £180,000 to around £164,000.

Stress testing: could you cope if rates rose?

Lenders also check whether you could keep up repayments if interest rates rose. The exact test varies by lender, but it's sensible to run your own. At 4.5% over 30 years, a £180,000 mortgage costs about £912 a month. If rates rose by three percentage points to 7.5%, the same mortgage would cost about £1,259 a month.

Your deposit and loan-to-value

Your deposit doesn't change how much a lender will lend against your income, but it affects:

• Your total budget. Borrowing plus deposit equals the price you can pay.
• Your interest rate. Rates are banded by loan-to-value (LTV). Moving from 90% LTV to 85% or 75% can unlock noticeably cheaper deals.
• Your options. Some lenders offer 95% mortgages, but choice is wider at 90% and below.

A bigger deposit means a smaller loan, lower monthly payments and more protection if house prices fall.

Your credit history

Lenders check your credit file to see how you've managed borrowing in the past. Late payments, defaults or County Court Judgments can reduce what you're offered or limit you to specialist lenders. Before you apply:

• Check your credit report with the main credit reference agencies and correct any errors.
• Make sure you're on the electoral roll at your current address.
• Avoid applying for new credit in the months before your mortgage application.
• Keep card balances low relative to your limits.

Don't forget the other costs of buying

When setting your budget, leave room for:

• Stamp duty, which depends on the price, where you're buying and whether you're a first-time buyer. Our stamp duty calculator covers England, Northern Ireland, Scotland and Wales.
• Solicitor or conveyancer fees
• Survey and valuation fees
• Mortgage arrangement and broker fees
• Moving costs and furniture

Ways to borrow more, or borrow better

1. Pay down existing debts. Clearing a car loan or card balance can increase what you can borrow.
2. Apply jointly. Two incomes usually mean a higher limit, though both credit files are checked.
3. Choose a longer term. A 35-year term lowers monthly payments, which can help with affordability, but you'll pay more interest overall.
4. Use a broker. Brokers know which lenders suit your circumstances, such as self-employment or variable income.
5. Look at schemes. Shared ownership or other first-time buyer schemes may help, depending on where you live.

Just because a lender will lend you a certain amount doesn't mean you should borrow it. Work out what you're comfortable paying each month after all your other costs, then work backwards.

Getting an agreement in principle

Once you have a rough figure, an agreement in principle (also called a decision or mortgage in principle) from a lender shows how much they'd be willing to lend, subject to full checks. Estate agents often ask for one before you make an offer. Many lenders use a soft credit search for this, which won't affect your score.