Home Affordability Calculator
Estimate how much home you can afford based on the 28/36 rule used by most mortgage lenders.
30 Years Fixed
15 Years Fixed
20 Years Fixed
Based on your financial profile, you could afford a home priced up to:
How Is Home Affordability Calculated?
Lenders primarily use two debt-to-income (DTI) ratios to determine how much they are willing to lend you. This is commonly known as the 28/36 Rule:
- The Front-End Ratio (28%): Your monthly housing costs (principal, interest, taxes, and insurance) should not exceed 28% of your gross monthly income.
- The Back-End Ratio (36%): Your total monthly debt obligations (including the new mortgage, car loans, student loans, and credit cards) should not exceed 36% of your gross monthly income.
Example Calculation
Realistic Scenario:
If you earn $90,000 annually, your gross monthly income is $7,500.
– 28% of $7,500 = $2,100 (Max housing payment)
– 36% of $7,500 = $2,700 (Max total debt)
If you have $500 in existing monthly debt, your back-end limit for a mortgage is $2,700 – $500 = $2,200.
In this case, the $2,100 limit (the lower of the two) is used to calculate your maximum loan amount.
If you earn $90,000 annually, your gross monthly income is $7,500.
– 28% of $7,500 = $2,100 (Max housing payment)
– 36% of $7,500 = $2,700 (Max total debt)
If you have $500 in existing monthly debt, your back-end limit for a mortgage is $2,700 – $500 = $2,200.
In this case, the $2,100 limit (the lower of the two) is used to calculate your maximum loan amount.
Factors That Impact Your Budget
While this calculator provides a mathematical limit, other factors play a huge role in your actual home-buying power:
- Credit Score: A higher credit score can secure lower interest rates, significantly increasing your buying power for the same monthly payment.
- Down Payment: A larger down payment reduces the loan amount and may eliminate the need for Private Mortgage Insurance (PMI), which adds to your monthly cost.
- Local Property Taxes: High-tax areas reduce the amount of "Principal and Interest" you can afford, lowering your total purchase price potential.
- Interest Rates: Even a 1% shift in interest rates can change your home affordability by tens of thousands of dollars.