Home Affordability Calculator
15 Years
30 Years
Maximum Home Price
$0
Based on a 36% Debt-to-Income Ratio
Max Monthly Payment (PITI):
$0
Est. Principal & Interest:
$0
Est. Taxes & Insurance:
$0
Loan Amount:
$0
How Much House Can You Really Afford?
Determining your budget is the first and most critical step in the home buying process. This Home Affordability Calculator takes the guesswork out of the equation by analyzing your income, debts, and down payment savings to generate a realistic maximum home price.
While a bank pre-approval letter gives you a specific number, calculating it yourself helps you understand the components that drive that number, ensuring you don't overextend your finances.
Understanding the 28/36 Rule
Most lenders use the "28/36 rule" to determine how much they will lend you. This rule is the core logic behind our calculator:
- Front-End Ratio (28%): Your estimated monthly housing expenses (Principal, Interest, Taxes, and Insurance – PITI) should not exceed 28% of your gross monthly income.
- Back-End Ratio (36%): Your total monthly debt payments (housing expenses + student loans, car payments, credit cards) should not exceed 36% of your gross monthly income.
Example: If you earn $5,000 per month, the 28% rule suggests a max mortgage payment of $1,400. However, if you also have $500 in car payments, the 36% rule limits your total debts to $1,800. After subtracting the car payment ($1,800 – $500), your max mortgage payment becomes $1,300. The lender will always use the lower of the two numbers.
Factors Influencing Your Buying Power
Several variables can drastically change your affordability:
- Interest Rates: Even a 1% increase in interest rates can reduce your buying power by tens of thousands of dollars because more of your monthly payment goes toward interest rather than principal.
- Down Payment: A larger down payment not only reduces the loan amount but also eliminates Private Mortgage Insurance (PMI) if you put down 20% or more, freeing up monthly cash flow for a more expensive home.
- Debt Load: Paying off a monthly obligation, like a car loan or credit card balance, directly increases your borrowing capacity dollar-for-dollar.
What Are "Hidden" Costs?
When calculating affordability, do not forget to account for Property Taxes and Homeowners Insurance. In high-tax areas, these costs can equal or exceed the principal repayment portion of your mortgage. Our calculator allows you to input an estimated monthly amount for these items to give you a precise "Principal and Interest" calculation.