Mortgage Affordability Calculator
Your Affordability Results
Maximum Estimated Home Price: $0
Maximum Loan Amount: $0
Estimated Monthly Payment (P&I): $0
How Much House Can I Afford?
Determining your home buying budget is the most critical step in the real estate journey. While a bank might pre-approve you for a certain amount, understanding the math behind mortgage affordability helps you stay "house-rich" rather than "house-poor." This calculator uses the Debt-to-Income (DTI) ratio, a standard metric used by lenders to evaluate your ability to manage monthly payments.
The Key Factors of Mortgage Affordability
Lenders typically look at four primary components when deciding how much they are willing to lend you:
- Gross Annual Income: Your total income before taxes. Most lenders want your total housing costs to be less than 28-33% of this figure.
- Debt-to-Income (DTI) Ratio: This is the percentage of your gross monthly income that goes toward paying debts (student loans, car notes, credit cards). A DTI of 43% is generally the maximum for a Qualified Mortgage.
- Down Payment: The cash you bring to the table. A larger down payment reduces your loan amount and can eliminate the need for Private Mortgage Insurance (PMI).
- Interest Rate: Even a 1% difference in interest rates can change your purchasing power by tens of thousands of dollars.
Understanding the Calculation
Our calculator determines your "Maximum Home Price" by calculating the maximum monthly mortgage payment you can afford based on your DTI limit, subtracting existing debts, and then reverse-calculating the principal loan amount using the standard amortization formula:
Where M is the monthly payment, r is the monthly interest rate, and n is the number of months in the loan term.
Example Affordability Scenario
If you earn $100,000 per year ($8,333/month) and have $400 in monthly debts:
- At a 43% DTI, your total debt limit is $3,583/month.
- Subtracting your $400 debt leaves $3,183 for a mortgage payment.
- With a 6.5% interest rate on a 30-year term, that $3,183 supports a loan of approximately $503,000.
- If you have a $50,000 down payment, your max home price is $553,000.