Home Affordability Calculator
Find out how much house you can afford based on your income, debts, and down payment.
The Formula
Max Total Debt = Gross Income × 0.36
Max Loan = PMT × [(1+r)ⁿ − 1] / [r(1+r)ⁿ]
Max housing = $7,500 × 0.28 = $2,100/mo
At 7% / 30yr → max loan ≈ $315,000
Max home ≈ $394,000 (with 20% down)
How Lenders Determine How Much You Can Borrow
Lenders use two key debt-to-income ratios to assess your borrowing capacity. The front-end ratio compares your total monthly housing payment — principal, interest, taxes, insurance, and HOA fees — to your gross monthly income. Most lenders want this below 28%. The back-end ratio compares all monthly debt payments (housing plus car loans, student loans, credit cards, and other obligations) to gross income. Most conventional lenders want this below 36–43%, though some will stretch to 50% for well-qualified borrowers. Our calculator uses these guidelines to estimate your affordable home price range.
The 28/36 Rule: A Conservative Benchmark
Many financial advisors recommend the 28/36 rule: no more than 28% of gross income on housing and no more than 36% on all debt combined. A household earning $9,000 per month gross should ideally spend no more than $2,520 on housing costs. Going higher is possible — lenders allow it — but it leaves thinner margins for emergencies, job loss, or unexpected expenses. The question is not just what you can be approved for, but what you can comfortably sustain over 30 years.
The Hidden Costs of Homeownership
The mortgage payment is just the beginning. Budget for property taxes (0.5–2.5% of home value annually depending on location), homeowners insurance ($1,000–$3,000 per year for most homes), HOA fees where applicable, and maintenance and repairs (budget 1–2% of home value per year). A $450,000 home might have a $2,400 mortgage payment but $700 per month in taxes and insurance — bringing the true monthly cost well above what the calculator shows for principal and interest alone.
Frequently Asked Questions
What is debt-to-income ratio and how does it affect mortgage approval?
DTI is total monthly debt payments divided by gross monthly income. Lenders use it to gauge your ability to manage additional debt. Most conventional lenders want a back-end DTI below 43%, though some programs allow up to 50%. A lower DTI generally means better loan terms and a higher approval amount. Paying down existing debt before applying for a mortgage can meaningfully improve your DTI.
What is PMI and how do I avoid it?
Private Mortgage Insurance is required by most lenders when your down payment is less than 20%. It protects the lender if you default — not you. PMI typically costs 0.5–1.5% of the loan amount annually. You can avoid it by putting 20% down, using a piggyback loan structure, or requesting cancellation once you reach 20% equity through payments and appreciation.
How does my credit score affect how much house I can afford?
Your credit score directly affects your interest rate, which affects your monthly payment, which determines how much home you can afford. The difference between a 680 and a 760 score can be 0.5–1% in rate. On a $400,000 mortgage, that is roughly $130–260 per month and $47,000–$93,000 over 30 years. Improving your credit before applying can significantly increase your buying power.
How much should I save for a down payment?
The traditional target is 20%, which eliminates PMI and provides immediate equity. But many buyers put down 3–10% — FHA loans allow as little as 3.5% with a 580 credit score, and some conventional programs allow 3% for first-time buyers. A smaller down payment gets you into a home sooner but means higher monthly payments, PMI costs, and less protection if prices decline.
What is mortgage preapproval and why does it matter?
Preapproval is a lender's conditional commitment to lend you up to a specific amount based on verified income, assets, credit, and employment. It involves a hard credit check and documentation review. In competitive markets, sellers often require a preapproval letter with any offer. It also helps you shop with confidence, knowing your actual budget rather than just an estimate.