Home Affordability Calculator
Determine how much house you can actually afford based on your income and debts.
Your Estimated Affordability
Estimated Home Price: $0
Maximum Monthly Mortgage (P&I): $0
Total Monthly Housing Cost: $0
*Based on a 36% Debt-to-Income ratio recommendation.
How Is Home Affordability Calculated?
Lenders typically use the 28/36 Rule to determine how much they are willing to lend you. This rule suggests that your mortgage payment should not exceed 28% of your monthly gross income, and your total debt payments (including the new mortgage) should not exceed 36%.
The Impact of Interest Rates
Even a 1% change in interest rates can significantly impact your buying power. When rates rise, your monthly interest cost increases, which lowers the total principal amount you can afford for the same monthly payment. For example, on a $400,000 loan, the difference between 5% and 6% interest is roughly $250 per month.
Down Payments and Your Budget
A larger down payment does two things: it reduces the total loan amount and often eliminates the need for Private Mortgage Insurance (PMI). If you put down less than 20%, you should factor in an additional 0.5% to 1% of the loan amount annually for PMI costs.
Debt-to-Income (DTI) Ratio
Your DTI is one of the most critical factors. If you have high car payments or student loans, your "affordability" decreases because a larger portion of your income is already committed. To increase your home budget, consider paying down revolving debts before applying for a mortgage.
Example Scenario
If you earn $100,000 per year, your gross monthly income is $8,333. Using the 36% rule, your total monthly debt should not exceed $3,000. If you already have $500 in car and student loan payments, you have $2,500 available for your mortgage, taxes, and insurance.