Home Affordability Calculator

How It Works

Most lenders judge affordability with two debt-to-income (DTI) rules. The front-end rule (28%) says your monthly housing payment — principal, interest, taxes, insurance, PMI and HOA — should be no more than 28% of your gross monthly income. The back-end rule (36%) says your housing payment plus all your other monthly debts (car payments, student loans, credit cards) should be no more than 36% of your gross monthly income. This calculator works out both limits and uses the lower one, so the stricter rule is the one that sets your maximum home price.

To turn a monthly payment limit into a home price, the calculator works the mortgage formula backwards. Let m be the monthly principal-and-interest factor, m = r(1+r)ⁿ / ((1+r)ⁿ − 1), where r is the monthly interest rate and n is the number of monthly payments (if the rate is 0%, m = 1/n). Let t be the monthly property tax as a fraction of the price, and p the monthly PMI fraction (0.5% per year of the loan, divided by 12, when PMI applies). The monthly payment at any price is (price − down) × (m + p) + price × t + insurance/12 + HOA, so the maximum price is (max payment − insurance/12 − HOA + down × (m + p)) / (m + p + t). PMI is estimated at 0.5% of the loan amount per year when the down payment is under 20% of the home price: the calculator first solves the price assuming PMI applies, then checks whether the down payment is at least 20% of that price — if it is, the price is recomputed without PMI.

Worked example: $90,000 gross annual income, $400/month in debts, a $40,000 down payment, a 6.5% rate over 30 years, a 1.2% property tax rate, $1,800/year insurance and no HOA. Monthly gross income is $90,000 ÷ 12 = $7,500. The front-end limit is 28% × $7,500 = $2,100/month. The back-end limit is 36% × $7,500 − $400 = $2,700 − $400 = $2,300/month. The front-end limit is lower, so it binds and the maximum monthly payment is $2,100. Solving for the price gives a maximum affordable home price of $286,854.64. The down payment is $40,000 ÷ $286,854.64 = 13.9% of the price, under 20%, so PMI applies. At that price the $2,100 monthly payment breaks down as $1,560.29 principal and interest, $286.85 property tax, $150.00 insurance, $102.86 PMI and $0 HOA.

How to Use This Calculator

Start with your annual gross income — the amount you earn before taxes — and your total monthly debts. Include every regular non-housing debt payment: car loans, student loans, credit card minimums and any other loan payments. These debts matter because they shrink the back-end limit: the more you pay each month, the less room the 36% rule leaves for a housing payment, and the lower your maximum price.

Next, enter your down payment, the annual interest rate and the loan term. A larger down payment raises the price you can afford in two ways: it adds directly to the price, and if it reaches 20% of the price it removes PMI, which frees up part of your monthly payment. Then add the ongoing costs of the home: the annual property tax rate as a percentage of the home price, your yearly homeowners insurance, and any monthly HOA dues. Results update as you type, and the table shows both DTI limits, which one binds, and the full breakdown of the monthly payment at the maximum price.

Tips and Practical Advice

Paying down debts is often the fastest way to raise the price you can afford, because every dollar of monthly debt reduces the back-end limit by a dollar. If the back-end rule is the one binding your result, try the calculator with a lower debt figure to see how much more house a smaller debt load would buy you.

The interest rate matters more than it looks. A lower rate shrinks the monthly principal-and-interest factor, so the same payment limit buys a higher price. It is worth getting a real rate quote from a lender before you house-hunt, rather than guessing — and worth testing the calculator at both a higher and a lower rate so you know how sensitive your budget is to rate changes.

Finally, remember that the maximum price is a ceiling, not a target. The 28/36 rules are lender guidelines, not a personal budget: they do not account for your other spending, savings goals or emergency fund. Many buyers are more comfortable below the maximum, especially if taxes or insurance rise after purchase. Use the result to set your search range, then confirm the final figures with your lender.

Frequently Asked Questions