Home Affordability Calculator

How to Use the Home Affordability Calculator

Our free home affordability calculator uses the industry-standard 28/36 debt-to-income rule to determine the maximum home price you can comfortably afford. Enter your annual gross income, existing monthly debt payments, available down payment, expected mortgage interest rate, loan term, local property tax rate, and estimated annual homeowners insurance premium. The calculator instantly shows your maximum purchase price, loan amount, and a detailed monthly payment breakdown.

Buying a home is likely the largest financial decision you will ever make. Overextending on a mortgage can lead to financial stress, while being too conservative may cause you to miss out on building equity. This calculator strikes the right balance by applying the same affordability guidelines that most mortgage lenders use when evaluating loan applications.

Understanding the 28/36 DTI Rule

The 28/36 rule is the most widely used guideline for mortgage affordability. The front-end ratio (28%) limits your total monthly housing costs, including principal, interest, property taxes, and homeowners insurance, to no more than 28% of your gross monthly income. The back-end ratio (36%) limits your total monthly debt obligations, including housing plus car loans, student loans, and credit card minimums, to no more than 36% of gross monthly income.

How Down Payment Affects Affordability

A larger down payment increases the home price you can afford by reducing the amount you need to borrow. Putting down at least 20% also eliminates the requirement for private mortgage insurance, which typically costs 0.5% to 1% of the loan amount annually. Even a modest increase in your down payment can significantly expand your buying power. For instance, increasing your down payment from 10% to 20% on a $300,000 home saves you roughly $150 per month in PMI alone.

Interest Rates and Your Buying Power

Mortgage interest rates have a dramatic impact on affordability. A 1% increase in interest rates can reduce your buying power by roughly 10%. For example, at 6% interest on a 30-year mortgage, a $2,000 monthly payment supports a loan of about $333,000. At 7%, that same payment only supports about $300,000. Timing your purchase to take advantage of lower rates, or choosing a shorter loan term with a lower rate, can save you tens of thousands of dollars over the life of the loan.

Frequently Asked Questions

How much house can I afford on my salary?

A common guideline is the 28/36 rule: spend no more than 28% of your gross monthly income on housing costs (principal, interest, taxes, insurance) and no more than 36% on total debt payments. For example, on a $75,000 salary, your max monthly housing cost would be about $1,750, and max total debt payments about $2,250.

What is the 28/36 rule for home buying?

The 28/36 rule is a lending guideline that says your monthly housing expenses should not exceed 28% of your gross monthly income (front-end ratio), and your total monthly debt payments including housing should not exceed 36% of gross monthly income (back-end ratio). Lenders use these ratios to determine how much mortgage you qualify for.

Does a bigger down payment help me afford a more expensive home?

Yes, a larger down payment directly increases the home price you can afford because you need to borrow less. It can also help you avoid private mortgage insurance (PMI), which is typically required when putting down less than 20%. Avoiding PMI saves you money each month, which may allow a slightly higher purchase price.

What other costs should I consider beyond the mortgage payment?

Beyond the mortgage principal and interest, you should budget for property taxes, homeowners insurance, HOA fees if applicable, maintenance and repairs (about 1% of home value annually), and closing costs (2% to 5% of the purchase price). These additional expenses can add hundreds of dollars per month to your housing budget.

How does my existing debt affect how much house I can afford?

Existing monthly debt payments directly reduce the amount available for housing under the 36% back-end DTI rule. For example, if you have $500 per month in car and student loan payments, that is $500 less available for your housing payment, which can reduce the maximum home price you qualify for by $80,000 to $100,000 or more.