Home Affordability Calculator
30 Years Fixed
20 Years Fixed
15 Years Fixed
10 Years Fixed
You can afford a home up to:
$0
Estimated Monthly Payment:
Total Loan Amount:
Debt-to-Income Ratio: 36%
Down Payment:
How Home Affordability is Calculated
Determining how much house you can afford involves more than just looking at your bank balance. Lenders primarily use the Debt-to-Income (DTI) ratio to assess your borrowing capacity. Most financial experts recommend the "28/36 Rule": your mortgage payment should not exceed 28% of your gross monthly income, and your total debt payments should not exceed 36%.
The 28/36 Rule Explained
This calculator uses a conservative DTI limit of 36% to ensure financial stability. We take your gross monthly income, multiply it by 0.36, and then subtract your existing monthly debts. The remaining amount is what lenders assume you can comfortably put toward a monthly mortgage payment, including principal, interest, taxes, and insurance (PITI).
Factors That Influence Your Budget
- Interest Rates: Even a 1% difference in interest rates can change your purchasing power by tens of thousands of dollars.
- Down Payment: A larger down payment reduces the loan amount, which lowers your monthly interest costs and may eliminate the need for Private Mortgage Insurance (PMI).
- Property Taxes & Insurance: These vary significantly by location. Our calculator estimates these based on average percentages of the home value.
- Loan Term: A 15-year mortgage has higher monthly payments than a 30-year mortgage but saves you a fortune in interest over time.
Realistic Example
If you earn $100,000 per year and have $500 in monthly debt payments (like a car loan), with a $50,000 down payment and a 6.5% interest rate, your calculated affordability would be approximately $385,000. This ensures that your total monthly housing costs remain within a healthy percentage of your income.