Home Affordability Calculator

1. Enter your annual gross income (before taxes).
2. Enter your total monthly debt payments, including car loans, student loans, and credit card minimums.
3. Enter the down payment amount you have saved or plan to put toward the purchase.
4. Set the expected interest rate and loan term (defaults are 6.5% and 30 years).
5. Optionally expand Advanced Settings to adjust property tax rate, insurance, HOA fees, and DTI ratios.
6. View your maximum affordable home price, monthly payment breakdown, and DTI ratios instantly.
7. Expand the Down Payment Comparison or Income Comparison tables for additional analysis.

The 28/36 Rule

The 28/36 rule is the standard guideline that mortgage lenders use to evaluate borrowers. The first number (28) refers to the front-end ratio: your total monthly housing costs should not exceed 28% of your gross monthly income. Housing costs include mortgage principal and interest, property taxes, homeowners insurance, and HOA fees. The second number (36) refers to the back-end ratio: your total monthly debt obligations, housing included, should not exceed 36% of gross monthly income. When both ratios are satisfied, lenders consider the borrower to have a manageable debt load. Some government-backed loans (FHA, VA) allow higher ratios, sometimes up to 43% or even 50% on the back end, but conventional lenders typically hold to stricter limits.

How Down Payment Affects Affordability

Your down payment directly reduces the loan amount, which lowers your monthly principal and interest payment. A larger down payment means you borrow less, pay less interest over the life of the loan, and may qualify for a better interest rate. Putting 20% down is a common target because it eliminates the need for Private Mortgage Insurance (PMI), which protects the lender if you default. PMI typically costs between 0.5% and 1.5% of the loan amount annually, adding $50 to $200 or more per month on a typical loan. Even if you cannot reach 20%, many loan programs accept down payments as low as 3% for first-time buyers.

Hidden Costs of Homeownership

Beyond the mortgage payment, homeowners face several recurring costs that renters do not. Maintenance and repairs typically run 1% to 2% of the home's value per year. Utilities may be higher in a house than in an apartment. Closing costs when purchasing usually range from 2% to 5% of the purchase price and include appraisal fees, title insurance, attorney fees, and lender origination charges. Property taxes can vary significantly by location, from under 0.5% in some states to over 2% in others. Homeowners association fees, if applicable, can add hundreds of dollars per month. It is important to budget for all of these expenses, not just the mortgage payment, before deciding how much home to buy.

Getting Pre-Approved

Before house hunting, getting pre-approved by a lender gives you a clear picture of your budget and shows sellers that you are a serious buyer. During pre-approval, the lender reviews your income, debts, credit score, and assets, then issues a letter stating the maximum loan amount you qualify for. This letter is typically valid for 60 to 90 days. Pre-approval is not a guarantee of funding, but it significantly strengthens your offer in competitive markets. Keep in mind that the amount a lender approves may be higher than what is comfortable for your budget, so use this calculator to determine your own comfortable limit independently.

Estimate your mortgage payment with our Mortgage Calculator, compare renting versus buying with the Rent vs. Buy Calculator, or plan your down payment savings with the Savings Calculator.