Home Affordability Calculator

HOW IT WORKS

How a home affordability calculator works

"How much house can I afford?" is really two questions in one. There is the monthly housing payment your income can carry, and there is the price of the home that payment buys once your down payment, property tax and insurance are counted. A lender starts from the first question; this calculator carries it all the way through to the second, using the same ratios mortgage underwriters apply.

DTI and the 28/36 rule

The central idea is your debt-to-income ratio (DTI) — the share of your gross monthly income that goes toward debt payments. The long-standing benchmark is the 28/36 rule: no more than 28% of gross income on the full housing payment (the front-end ratio), and no more than 36% on all debt combined, including that housing payment (the back-end ratio). Both limits apply, and the lower one wins:

Housing budget = lower of (Gross Monthly Income × 28%) and (Gross Monthly Income × 36% − Existing Debts)

On $6,000 a month with no other debt, 28% allows $1,680 and 36% allows $2,160, so the housing limit binds and the budget is $1,680. If you already pay $900 a month toward a car and student loan, the total-debt limit drops to $1,260 and becomes the binding one — which is why existing debt cuts so directly into how much home you can afford. The result panel tells you which limit set your number.

How much house can I afford by salary?

Using this calculator's defaults — a 30-year term at 7%, 20% down, 1% property tax, $2,000 a year for insurance and no other debt — here is what different incomes support. Your own figures will differ with a different rate, down payment, local tax rate or existing debt; use the calculator above for a number matched to your situation.

From housing budget to home price

The budget has to cover the whole monthly payment, not just the loan. Property tax rises with the price of the home, insurance is a roughly fixed cost, and PMI applies to the loan when you put down less than 20%. Whatever is left after those goes to principal and interest. Because every one of those costs scales with the price in a straight line, the calculator can solve for the price directly:

Home price = (Housing budget − monthly insurance) ÷ [ (1 − down%) × f + property tax% ÷ 12 ], where f = r(1 + r)ⁿ / [ (1 + r)ⁿ − 1 ] is the monthly payment per dollar borrowed, r is the monthly interest rate and n the number of months (PMI adds a further term below 20% down).

With the defaults, the $1,680 budget splits into $1,308 of principal and interest, $205 of property tax and $167 of insurance, which supports a $196,672 loan. Add the $49,168 down payment and the estimated home price is $245,840. Leave out tax and insurance, as a simple payment-to-loan calculator does, and the same budget appears to buy $315,646 — nearly $70,000 more house than the income really supports.

Why the term changes your affordability

Because the budget is fixed by your income, a longer term spreads the loan over more months and lets the same payment carry a larger price. The affordability-by-term table above makes it concrete: the payment stays at $1,680 whether you pick 15 years or 30, but the estimated home price climbs from about $188,600 to about $245,800. The catch is the total interest, which rises from roughly $93,000 to $274,000 — affording more by stretching the loan means paying far more for the money over its life, and longer terms often carry a slightly higher rate too.

How your down payment changes the price

A down payment works twice. It adds to the price directly, and at 20% or more it removes PMI, freeing part of the monthly budget for the loan itself. With the defaults:

Switch the down-payment field to Cash to enter what you actually have saved; the calculator works out the price that cash supports and tells you what share of it the cash covers.

What the estimate still leaves out

The calculator counts principal, interest, property tax, homeowners insurance and PMI. It does not count HOA or condo dues — add them to the insurance figure, since both are fixed monthly costs — and it does not count the cash you need on top of the down payment: closing costs of a few percent of the price, moving costs, and an emergency fund you keep intact after you buy. Local property tax varies widely, so replace the 1% default with the rate for the area you are shopping in.

What lenders also weigh

A ratio-based estimate uses only the numbers you type in, but a lender's decision rests on much more. Your credit score affects both whether you are approved and the rate you are offered, which in turn changes how much a given payment can borrow. Your cash reserves matter, because they show the lender you can weather a rough patch. Employment and income stability, the property's appraised value, and the loan program all feed into underwriting. None of these can be captured by an income ratio, which is why the number here is a planning estimate, not a promise to lend.

Ways to afford more home

If the estimate falls short, several levers genuinely help. Paying down existing debt — especially a car loan or credit-card balance — helps whenever the total-debt limit is the one binding, often the fastest win. Improving your credit score before you apply can earn a lower rate, and a lower rate lets the same payment carry a larger loan. Saving a bigger down payment raises the price directly and, past 20%, removes PMI. Adding a co-borrower with steady income raises the income the ratios are applied to. And shopping several lenders for a better rate can meaningfully change what you qualify for. Each of these strengthens your position without simply stretching to the top of what a lender will allow.

A note on DTI limits

The 28% and 36% ratios are guidelines, not hard walls. Conforming qualified mortgages generally permit a back-end DTI up to 43%, and some programs go higher when strong compensating factors — a high credit score, a large down payment, or substantial reserves — are present. One thing the calculator makes visible: raising the DTI cap on its own often changes nothing. With no other debt, the 28% housing limit binds first, so moving DTI from 36% to 43% leaves the estimate at $245,840; the price only rises if the housing ratio goes up too. Both are in the Advanced options. A higher ceiling means a larger slice of every paycheck committed before you have spent anything on living, saving or emergencies, so treat the defaults as the comfortable middle ground, then get a formal pre-approval from the lenders you intend to use before you make an offer.

Modeling FHA and VA loans

Government-backed loans use different ratios and down payments from the conventional defaults. An FHA loan commonly works to a 31% housing ratio and a 43% total-debt ratio, with as little as 3.5% down and an annual mortgage insurance premium for the life of most loans. A VA loan has no separate housing ratio, typically allows up to 41% total debt, and needs no down payment and no monthly mortgage insurance. At the same $6,000 monthly income, with no other debts, a 30-year term at 7%, 1% property tax and $2,000 a year insurance:

FHA comes out lower than conventional despite its looser ratios, because a 3.5% down payment means a larger loan plus mortgage insurance. The same 7% rate is used for all three for comparison; government-backed rates often differ. FHA and VA also weigh residual income, credit score and other underwriting factors this calculator does not model, and the VA funding fee is not included — treat these as directional, not a substitute for a lender's own qualification.