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Mortgage Affordability Calculator

Use this calculator to estimate how much you can afford for a mortgage based on your income, debts, and desired monthly payment.

Understanding Mortgage Affordability

Determining how much mortgage you can afford is a crucial step in the home-buying process. Lenders typically consider several factors, but two primary guidelines are often used: the 28/36 rule and the lender's specific debt-to-income (DTI) ratio limits.

Debt-to-Income (DTI) Ratio

The DTI ratio compares your total monthly debt payments to your gross monthly income. It's expressed as a percentage.

Front-end DTI (Housing Ratio): This ratio typically includes your potential monthly mortgage payment (principal, interest, property taxes, and homeowner's insurance – PITI) plus any HOA dues. Many lenders suggest this shouldn't exceed 28% of your gross monthly income.

Back-end DTI (Total Debt Ratio): This ratio includes your potential mortgage payment (PITI + HOA dues) PLUS all other recurring monthly debt payments (car loans, student loans, credit card minimums, etc.). Lenders often prefer this to be no more than 36% of your gross monthly income, though some may allow up to 43% or even higher depending on your credit score and other factors.

How This Calculator Works

This calculator uses the back-end DTI ratio to estimate your maximum affordable mortgage payment. It takes your annual household income, subtracts your existing monthly debt payments, and then determines the maximum monthly payment you can afford based on your chosen maximum DTI percentage. From this maximum monthly payment, it then works backward to estimate the total loan amount you could qualify for, considering your down payment, interest rate, and loan term.

Key Inputs Explained:

  • Annual Household Income: Your total gross income from all sources before taxes.
  • Total Monthly Debt Payments: This includes minimum payments on credit cards, car loans, student loans, personal loans, and any other recurring monthly debt obligations. It does NOT include utilities or rent/mortgage if you're currently renting.
  • Down Payment Amount: The cash you'll put towards the purchase price of the home. A larger down payment reduces the loan amount needed.
  • Estimated Annual Interest Rate: The expected interest rate on your mortgage loan. This significantly impacts your monthly payment.
  • Loan Term (Years): The duration over which you will repay the mortgage (e.g., 15, 20, 30 years). Longer terms result in lower monthly payments but more interest paid over time.
  • Maximum Debt-to-Income Ratio (%): The highest DTI percentage you are comfortable with or believe a lender might approve. A common benchmark is 43%.

Disclaimer: This calculator provides an estimate and should not be considered a guarantee of loan approval. Actual loan amounts and terms are determined by individual lenders based on a thorough review of your financial situation, credit history, and current market conditions.

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