How Much House Can I Afford?
30 Years
20 Years
15 Years
Please enter valid numeric values for Income and Interest Rate.
Maximum Home Price:
$0
Total Monthly Payment:
$0
Principal & Interest:
$0
Taxes & Insurance:
$0
Debt-to-Income Ratio Used:
36%
Understanding Your Home Buying Power
Before you start attending open houses or browsing listings, it is crucial to answer the question: "How much house can I afford?" This calculator uses industry-standard Debt-to-Income (DTI) ratios to estimate a realistic housing budget based on your income, existing debts, and down payment savings.
How Affordability is Calculated
Lenders primarily look at two metrics when determining how much money they will lend you for a mortgage:
- Front-End Ratio (28% Rule): Typically, your monthly housing costs (mortgage principal, interest, taxes, insurance, and HOA) should not exceed 28% of your gross monthly income.
- Back-End Ratio (36% Rule): Your total monthly debt payments (housing costs + credit cards, car loans, student loans, etc.) should not exceed 36% of your gross monthly income.
Pro Tip: While some lenders allow DTI ratios up to 43% or even 50% for certain loan types (like FHA loans), sticking to the 28/36 rule is safer for your long-term financial health.
Factors That Impact Your Budget
Several variables can significantly swing your affordability number:
1. Interest Rates
Even a small increase in interest rates can drastically reduce your buying power. A 1% increase in rates can reduce your maximum loan amount by approximately 10-11% while keeping the monthly payment the same.
2. Down Payment
The more you put down, the more home you can buy. A larger down payment reduces the loan amount required, lowers your monthly payments, and can eliminate the need for Private Mortgage Insurance (PMI).
3. Property Taxes and HOA Fees
Remember that your monthly payment isn't just the loan. High property taxes or expensive Homeowners Association (HOA) fees eat into your monthly budget, reducing the amount available for the actual mortgage loan.
Improving Your Home Affordability
If the result from the calculator is lower than home prices in your area, consider these strategies:
- Pay down existing debt: reducing credit card balances or finishing a car loan frees up monthly cash flow for a mortgage.
- Save for a larger down payment: This directly increases your max price dollar-for-dollar.
- Improve your credit score: Better scores qualify for lower interest rates, which increases buying power.