Home Affordability Calculator
Find the maximum home price you can realistically afford based on your gross income, existing debts, down payment, and mortgage rate. Use it before house hunting to set a firm budget.
About this calculator
Lenders qualify buyers using a debt-to-income (DTI) ratio — your total monthly debt payments divided by gross monthly income. The standard back-end DTI limit is 43%, though many conventional loans target 36%. This calculator derives the maximum affordable home price with the formula: Max Price = [(annualIncome/12 × DTI/100 − monthlyDebts) / mortgagePaymentFactor] / (1 − downPaymentPercent/100), where mortgagePaymentFactor = (r × (1+r)^360) / ((1+r)^360 − 1) and r = interestRate/100/12. Dividing by (1 − downPaymentPercent/100) grosses up the loan amount to a total purchase price. The result tells you the highest price at which your mortgage payment plus existing debts stays within the chosen DTI limit.
How to use
Assume $90,000 annual income, $500 monthly debts, 10% down, 7% mortgage rate, and 43% max DTI. Monthly income = $90,000/12 = $7,500. Max total debt payment = $7,500 × 0.43 = $3,225. Available for mortgage = $3,225 − $500 = $2,725. Monthly rate r = 7/100/12 ≈ 0.005833. Factor = (0.005833 × 1.005833^360) / (1.005833^360 − 1) ≈ 0.006653. Max loan = $2,725 / 0.006653 ≈ $409,591. Max price = $409,591 / (1 − 0.10) = $409,591 / 0.90 ≈ $455,101.
Frequently asked questions
What debt-to-income ratio do lenders require for a mortgage?
Most conventional lenders require a back-end DTI (all monthly debts including the proposed mortgage) of 43% or below, though 36% is preferred for the best rates. FHA loans allow up to 50% DTI with compensating factors like a large down payment or significant cash reserves. A lower DTI signals financial stability and often results in better loan terms. If your DTI is too high, paying down existing debts before applying — even partially — can meaningfully increase your qualifying loan amount.
How does a larger down payment affect how much house I can afford?
A larger down payment reduces the loan amount you need, which lowers the monthly mortgage payment and allows you to qualify for a more expensive home within the same DTI limit. It also eliminates private mortgage insurance (PMI) when you reach 20%, saving 0.5–1.5% of the loan amount annually. Additionally, a bigger down payment reduces the lender's risk, sometimes unlocking a better interest rate. The trade-off is liquidity: tying up more cash in a home leaves less for emergencies or investments.
Why is the 28/36 rule important when calculating home affordability?
The 28/36 rule is a traditional lending guideline stating that housing costs (mortgage, taxes, insurance) should not exceed 28% of gross monthly income, and total debt should not exceed 36%. It's more conservative than the 43% DTI limit many modern lenders accept. Using the stricter 28% front-end ratio protects buyers from becoming 'house poor' — technically able to afford the payment but with little left for savings, maintenance, or unexpected costs. Running this calculator at both 36% and 43% DTI gives you a realistic range rather than a single number.