Finance
Home Affordability Calculator
Calculate how much house you can afford based on income and debts
FAQs
What is the 28/36 rule?
It is a common lender guideline: you should spend no more than 28% of your gross monthly income on housing costs, and no more than 36% on total debt payments (including mortgage, car loans, etc.).
What is Debt-to-Income (DTI) ratio?
DTI is your total monthly debt payments divided by your gross monthly income. Most conventional loans require a DTI below 43%, though some government programs go higher.
Does this include property taxes and insurance?
Yes, our calculator estimates property taxes and homeowners insurance to give you a more accurate picture of your total monthly housing payment.
How to Use the Home Affordability Calculator
Determining your budget is the first step in the home-buying process. This calculator uses professional lending standards (DTI ratios) to help you understand what mortgage you can realistically handle.
- Enter your annual household gross income before taxes.
- Input your total monthly debt payments (car loans, student loans, credit card minimums).
- Set your intended down payment amount.
- Input the current market interest rate and desired loan term.
- Review the maximum home price and estimated monthly payment breakdown.
How Home Affordability is Determined
Lenders primarily use two Debt-to-Income (DTI) ratios to determine how much they will lend you.
Front-End Ratio (28% Rule)
Generally, your mortgage payment (PITI) shouldn't exceed 28% of your gross monthly income.
Example:
Input: $8,000 monthly income
Calculation: $8,000 × 0.28
Result: $2,240 max housing payment
Back-End Ratio (36% Rule)
Your total monthly debt obligations shouldn't exceed 36% to 43% of your gross income.
Example:
Input: $8,000 income, $500 other debts
Calculation: ($8,000 × 0.36) - $500 = $2,880 - $500
Result: $2,380 max mortgage payment
When to Check Your Affordability
Keep your budget updated as market conditions and your finances change.
Before Getting Pre-Approved
Run these numbers yourself so you approach lenders with a realistic budget in mind, not just what they are 'willing' to lend you.
When Interest Rates Shift
A 1% change in interest rates can significantly impact your buying power. Use this to see how rate hikes affect your target home price.
Planning a Career Change
If you're considering a higher or lower-paying job, see how it will affect your ability to stay in your current home or buy a new one.
Tips for Home Buyers
Tips
- Don't spend up to your absolute maximum - leave room for 'lifestyle' expenses like travel and dining.
- Lenders may approve you for more than you're comfortable paying. Trust your own budget.
- Remember to factor in closing costs (2-5% of home price) in addition to your down payment.
- Improving your credit score before buying can significantly lower your interest rate and increase affordability.
- A 20% down payment avoids Private Mortgage Insurance (PMI), lowering your monthly cost.
Common Mistakes to Avoid
- Ignoring the impact of property taxes and insurance on the monthly payment.
- Only considering the mortgage payment and forgetting about home maintenance and repairs.
- Buying at the absolute top of your budget without an emergency fund.
- Taking on new debt (like a car loan) shortly before applying for a mortgage.