How is home affordability calculated?

This calculator uses standard lender guidelines: 28% front-end DTI (housing costs as percentage of income) and 36% back-end DTI (total debts including housing). The lower of these determines your maximum payment.

What is debt-to-income ratio (DTI)?

DTI compares monthly debt payments to gross monthly income. Lenders typically require housing costs under 28% of income and total debts under 36%. Lower DTI ratios often qualify for better rates.

Does this include property taxes and insurance?

Yes, the calculator estimates taxes and insurance at approximately 25% of principal and interest to provide a realistic total housing payment estimate.

What if I have excellent credit?

Excellent credit may qualify you for lower rates (reducing monthly payments) and some lenders may accept higher DTI ratios up to 43-45%, potentially increasing affordability.

Should I buy the maximum home I can afford?

The maximum is a ceiling, not a target. Consider leaving room for savings, maintenance costs, and lifestyle expenses. Many advisors recommend staying below your maximum qualification.

How do other debts affect home affordability?

Every $500 in monthly debt payments reduces home buying power by approximately $90,000. Paying off car loans or credit cards before house hunting significantly increases affordability.

What additional costs should I plan for?

Plan for closing costs (2-5% of loan), moving expenses, immediate repairs, furniture, and ongoing maintenance (1-2% of home value annually). Don't use all savings for the down payment.

How does location affect what I can afford?

Property taxes and insurance vary significantly by location. High-tax areas reduce the home price you can afford. Research local tax rates before assuming affordability.

Home Affordability Calculator

Calculate how much house you can afford based on income

Instant results•No signup•Estimates only

Annual Income

Monthly Debts

Down Payment

Interest Rate

Loan Term

Maximum Home Price

$301,028

Max Loan Amount

$251,028

Max Monthly Payment

$1,983

Debt-to-Income Ratio

35.06%

Visualization

Monthly Payment Breakdown

Principal$700(70%)

Interest$300(30%)

Monthly Payment: $1,000

Results are estimates and may vary based on lender terms and fees.

Results are estimates for informational purposes only and do not constitute financial advice. Actual results may vary based on lender terms, fees, and other factors.

How calculations work Full disclaimer

Home Affordability Calculator Formula

Max Payment = Income \times 0.28

Lenders use two DTI ratios: the front-end ratio (28%) limits housing costs to 28% of gross income, while the back-end ratio (36%) limits total debts including housing to 36% of income. Your maximum affordable payment is the lower of these two calculations.

How the Home Affordability Calculator Works

1Enter your gross annual household income
2Input your current monthly debt payments (car loans, student loans, credit cards)
3Specify your available down payment
4Enter the expected interest rate
5View the maximum home price you can afford based on lender guidelines

Home Affordability Calculator Key Terms

DTI (Debt-to-Income): The percentage of your gross monthly income that goes toward debt payments. Lenders use this to assess borrowing capacity.
Front-End Ratio: Housing costs (PITI) as a percentage of income. Traditionally capped at 28% for conventional loans.
Back-End Ratio: Total monthly debts including housing as a percentage of income. Traditionally capped at 36%.
Gross Income: Your total income before taxes and deductions, used by lenders to calculate affordability.

Home Affordability Calculator Tips

•The maximum you're approved for isn't necessarily what you should spend
•Leave room in your budget for maintenance, repairs, and lifestyle expenses
•Excellent credit may qualify you for higher DTI limits (up to 43-45%)
•Reduce existing debts before house hunting to increase buying power
•Consider future expenses like children, career changes, or retirement savings

When to Use This Home Affordability Calculator

✓Beginning the home buying process to set realistic expectations
✓Determining how much down payment is needed for target homes
✓Understanding how existing debts affect home buying power
✓Planning debt payoff strategy before house hunting
✓Comparing affordability at different interest rate scenarios

Home Affordability Calculator Examples

First-Time Buyer

Income:$75,000Debts:$400/moDown Payment:$30,000Rate:6.5%

Result:$285,000 max price

With $75,000 income and $400 monthly debts, you can afford approximately $285,000 with $30,000 down at current rates.

High Income Buyer

Income:$150,000Debts:$800/moDown Payment:$100,000Rate:6.5%

Result:$615,000 max price

Higher income and larger down payment significantly increase buying power to $615,000.

Debt-Free Buyer

Income:$85,000Debts:$0Down Payment:$50,000Rate:6.5%

Result:$385,000 max price

No existing debts allows maximum housing allocation, affording up to $385,000.

Understanding Home Affordability in Depth

Knowing how much home you can afford before you start shopping prevents heartbreak from falling in love with properties beyond your means. This calculator uses the same debt-to-income ratios that lenders use to qualify borrowers.

How Lenders Calculate Affordability

Most conventional lenders apply two DTI ratios. The 28% front-end ratio limits your housing payment (PITI) to 28% of gross monthly income. The 36% back-end ratio limits total debt payments including housing to 36% of income. Your maximum is determined by whichever calculation is more restrictive.

Flexibility in Qualification

These ratios aren't absolute. Borrowers with excellent credit (740+), substantial reserves, or compensating factors may qualify for DTIs up to 43-45%. FHA loans allow up to 50% back-end DTI in some cases. However, qualifying at maximum DTI leaves little financial cushion.

The Smart Approach

Many financial advisors recommend more conservative ratios—25% front-end and 30% back-end—to maintain quality of life and savings capacity. Remember that mortgage payments are just the beginning; homeownership includes maintenance, repairs, utilities, and potential HOA fees.

Improving Your Buying Power

To afford more home: increase down payment, pay off existing debts, boost income, or improve credit for better rates. Paying off a $400/month car payment could add $70,000-80,000 to your home buying power.

Home Affordability Calculator FAQs

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Marcus Chen

Financial Analysis Specialist

Marcus has over 12 years of experience in quantitative finance and personal financial planning. He specializes in loan analysis, investment modeling, and consumer debt strategies. His methodologies incorporate industry-standard financial mathematics used by major lending institutions.

Content reviewed: January 2026Next review scheduled: 2027

Editorial Standards: All calculations use industry-standard financial formulas. Content is reviewed for mathematical accuracy and updated to reflect current market conditions. This tool provides estimates for informational purposes and does not constitute financial advice.