Home Affordability Calculator
Results
How Much House Can I Afford?
Determining your home buying budget is the most critical step in the real estate journey. While banks use complex algorithms, our home affordability calculator uses the industry-standard Debt-to-Income (DTI) ratio to estimate your purchasing power. Generally, lenders prefer that your total monthly debts (including your new mortgage) do not exceed 36% to 43% of your gross monthly income.
Understanding the 28/36 Rule
Most financial experts recommend the 28/36 rule:
- 28%: Your mortgage payment should not exceed 28% of your monthly gross income.
- 36%: Your total debt payments (mortgage + car loans + student loans + credit cards) should not exceed 36% of your monthly gross income.
Example Calculation
If you earn $80,000 per year, your gross monthly income is $6,666. Using the 36% rule, your total monthly debt limit is $2,400. If you already have $500 in monthly car and student loan payments, you have $1,900 remaining for your monthly mortgage payment (Principal, Interest, Taxes, and Insurance).
Factors That Impact Your Affordability
1. Interest Rates: Even a 1% difference in interest rates can change your purchasing power by tens of thousands of dollars.
2. Down Payment: A larger down payment reduces your loan amount, which lowers your monthly interest costs and may eliminate the need for Private Mortgage Insurance (PMI).
3. Credit Score: Higher credit scores qualify you for lower interest rates, effectively increasing the "price" of the home you can afford for the same monthly payment.
4. Property Taxes & Insurance: Our calculator focuses on the Principal and Interest (P&I). Remember to set aside roughly 1-2% of the home value annually for taxes and insurance.