Mortgage Affordability Calculator

How Much House Can I Afford?

The answer depends on three things: how much you earn, how much you owe, and how much you have saved for a down payment. This calculator works backward from your income to find the maximum home price that fits within standard lending guidelines.

The starting point is your debt-to-income ratio (DTI) — the percentage of your gross monthly income that goes toward debt payments. Most lenders cap this at 36-43%, though the traditional guideline is 36%.

Key takeaway: Your income sets the ceiling. Your existing debts and down payment determine where within that ceiling you land. Paying off a $300/month car loan can add $40,000+ to your home buying budget.

The 28/36 Rule Explained

Lenders use two ratios to evaluate mortgage applications:

• Front-end ratio (28%): Your total housing costs — mortgage principal, interest, property taxes, insurance, HOA, and PMI — should not exceed 28% of your gross monthly income.
• Back-end ratio (36%): Your total monthly debt payments (housing + car loans, student loans, credit cards, etc.) should stay below 36% of gross income.

Some lenders approve borrowers at 43% or even 50% DTI for “qualified mortgages” under government rules. But a higher DTI means less margin for error — one unexpected expense can strain your budget.

This calculator defaults to 36% but lets you adjust the limit to match what your lender allows. For a conservative estimate, try 28%.

What Goes Into the Calculation

The calculator follows this sequence:

1. Maximum monthly housing budget = (Gross monthly income x DTI limit) minus existing monthly debt
2. Subtract fixed costs from that budget: property taxes, insurance, PMI (if applicable), and HOA fees
3. The remainder is available for principal and interest (P&I)
4. Work backward from the P&I amount using the standard mortgage formula to find the maximum loan amount
5. Add your down payment to get the maximum home price

Because PMI depends on the loan amount (which depends on PMI), the calculator iterates until the numbers converge.

Tip: Small changes in interest rate have a big impact. A 0.5% rate increase on a $300,000 loan reduces your buying power by roughly $20,000-$25,000.

Common Mistakes When Estimating Affordability

1. Using net income instead of gross. Lenders calculate DTI using gross (pre-tax) income, not take-home pay. Your actual cash flow is lower, so what a lender approves may feel tight.
2. Forgetting about property taxes and insurance. In some areas, property taxes add $400-$800/month to the payment. Always factor these in — they reduce the amount available for the actual mortgage.
3. Ignoring PMI. With less than 20% down, PMI can cost $100-$300/month. That directly reduces how much loan you can support.
4. Buying at the maximum. Lender approval is a ceiling, not a recommendation. Staying 10-15% below your maximum leaves room for home maintenance, retirement savings, and life.

Down Payment and PMI

A 20% down payment avoids PMI entirely. But saving 20% of a $400,000 home ($80,000) takes years for most people. Here is how different down payments affect affordability on an $80,000 income:

The table shows that each additional $20,000 saved adds roughly $30,000-$40,000 in buying power — partly from the larger down payment itself and partly from reduced or eliminated PMI.

When to Use This Calculator

Use the mortgage affordability calculator when you are:

• Starting to house-hunt and need a realistic price range before contacting agents
• Deciding how much to save for a down payment and want to see the trade-offs
• Comparing 15-year vs 30-year terms to see which fits your budget
• Weighing whether to pay off debt first — test how eliminating a car payment changes your max home price

Once you know your maximum, use the Mortgage Payment Calculator to explore specific home prices, see amortization schedules, and test extra payment scenarios.