Home Affordability Calculator
30 Years
20 Years
15 Years
10 Years
Estimated Purchasing Power:
$0
Max Monthly P&I Payment:
$0
Total Monthly Payment (PITI):
$0
Recommended Loan Amount:
$0
Debt-to-Income (DTI) Ratio:
36% (Standard)
How Much House Can I Afford?
Determining your home buying budget is the most critical step in the real estate journey. Lenders typically use the 28/36 rule to decide how much they are willing to lend you. This rule suggests that your mortgage payment should not exceed 28% of your gross monthly income, and your total debt payments (including the new mortgage) should not exceed 36%.
Key Factors in Home Affordability
- Gross Annual Income: Your total earnings before taxes. This is the baseline for all lending calculations.
- Debt-to-Income Ratio (DTI): This is the percentage of your gross monthly income that goes toward paying debts. A lower DTI makes you a more attractive borrower.
- Down Payment: The cash you pay upfront. A larger down payment reduces your loan amount and can eliminate the need for Private Mortgage Insurance (PMI).
- Interest Rates: Even a 1% difference in interest rates can change your purchasing power by tens of thousands of dollars.
Example Calculation
If you earn $80,000 per year, your gross monthly income is approximately $6,666. Using the 36% DTI limit, your total monthly debt obligations (including your future mortgage) should stay under $2,400. If you already have a $400 car payment, your maximum available monthly budget for a mortgage, taxes, and insurance is $2,000.
Tips to Increase Your Budget
To increase the amount you can afford, consider paying down existing high-interest debt like credit cards or student loans before applying. Additionally, shopping for competitive interest rates and improving your credit score can significantly lower your monthly payment, allowing you to qualify for a more expensive home with the same monthly budget.