House Affordability Calculator
Estimate the maximum home price you can afford based on your gross income, monthly debts, available down payment, mortgage rate, and a lender-standard debt-to-income ratio. Use it before house hunting to set a realistic price range.
About this calculator
Lenders qualify buyers primarily by debt-to-income (DTI) ratio — the share of gross monthly income that can go toward all debt payments. The maximum affordable home price is calculated as: affordablePrice = (((grossIncome × dtiRatio / 100) − monthlyDebts) / monthlyMortgageFactor) + downPayment, where the monthly mortgage factor = (r × (1+r)^360) / ((1+r)^360 − 1) and r = mortgageRate / 100 / 12. This factor converts the maximum allowable monthly payment into a loan principal using the standard amortization formula for a 30-year fixed mortgage. Adding the down payment gives the total home price you can afford. Most conventional lenders cap DTI at 43%; FHA loans may allow up to 50%. A lower DTI or larger down payment directly increases your affordable price.
How to use
Assume: grossIncome = $7,000/month, monthlyDebts = $300, downPayment = $40,000, mortgageRate = 7%, dtiRatio = 43%. Step 1: Max total debt payment = $7,000 × 0.43 = $3,010. Step 2: Max mortgage payment = $3,010 − $300 = $2,710. Step 3: Monthly rate r = 0.07/12 ≈ 0.005833. Step 4: Mortgage factor = (0.005833 × 1.005833^360) / (1.005833^360 − 1) ≈ 0.006653. Step 5: Loan principal = $2,710 / 0.006653 ≈ $407,330. Step 6: Affordable price = $407,330 + $40,000 = $447,330.
Frequently asked questions
What debt-to-income ratio do lenders typically require to approve a mortgage?
Most conventional mortgage lenders prefer a back-end DTI (all monthly debts divided by gross monthly income) of 43% or below, which is also the qualified mortgage threshold set by the Consumer Financial Protection Bureau. Some lenders using automated underwriting may approve DTIs up to 50% for borrowers with strong credit scores and significant cash reserves. FHA loans formally allow up to 57% DTI in certain cases. A lower DTI not only improves approval odds but also often qualifies you for better interest rates, reducing the total cost of the loan over its lifetime.
How does the size of my down payment affect how much house I can afford?
Your down payment increases affordability in two ways. First, it directly reduces the loan amount needed, lowering your required monthly payment. Second, putting down 20% or more eliminates private mortgage insurance (PMI), which typically costs 0.5–1.5% of the loan amount annually and would otherwise count against your DTI. A larger down payment can also secure a lower interest rate, further reducing monthly costs. However, depleting all savings for a large down payment can be risky — most advisors recommend keeping 3–6 months of expenses in an emergency fund after closing.
Why does the calculator use a 30-year term by default for the affordability estimate?
A 30-year fixed mortgage produces the lowest possible monthly payment for a given loan amount, which maximizes the loan principal — and therefore the home price — you can afford under a DTI constraint. Lenders also commonly underwrite affordability using 30-year terms as the standard scenario. In practice, you can choose a 15-year or 20-year term, which will result in a lower maximum loan amount but far less total interest paid over the life of the loan. The calculator gives you a ceiling; your personal comfort with monthly payments and long-term interest costs should guide your actual loan term decision.