Home Affordability Calculator
Find the maximum home price you can afford based on your gross income, monthly debts, down payment, mortgage rate, and target debt-to-income ratio. Use it to set a realistic price ceiling before house-shopping or applying for pre-approval.
Last updated: May 2026
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About this calculator
The calculator backs into a maximum home price from the largest mortgage payment your income and existing debts can sustain on a 30-year fixed mortgage. The formula works in three steps: (1) Max total monthly debt = (Gross Income / 12) × DTI%; (2) Available housing payment = Max total − Monthly Debts; (3) Loan principal that the available payment can service at the entered annual rate over 360 months, plus the cash down payment, equals the max home price. Variables: Gross Income is annual pre-tax household income; Monthly Debts sums the recurring obligations a lender counts (car loans, student loans, credit-card minimums, alimony); Down Payment is cash on hand; Interest Rate is the annual rate quoted on a 30-year fixed; Debt-to-Income Ratio is your target back-end DTI — conventional loans typically cap at 36–43%, FHA can stretch to 50% with compensating factors. Edge cases: if Monthly Debts already exceed Income × DTI, the loan principal goes negative and your debts alone disqualify you. The model excludes property tax, homeowners insurance, HOA dues, and PMI — all four together can easily add $400–$800/month and shrink the realistic price by 15–25%. For a true PITI-based cap use the more conservative front-end ratio (28% of gross monthly income) instead.
How to use
Example 1 — Two-income household, 36% DTI. Gross income $120,000, monthly debts $400, down payment $40,000, rate 7.0%, DTI 36%. Step 1: max monthly debt = (120,000/12) × 0.36 = $3,600. Step 2: housing payment available = 3,600 − 400 = $3,200. Step 3: $3,200/month at 7%/12 over 360 months supports a loan ≈ $480,800. Add down payment → max price ≈ $520,800. Verify the amortization by hand: PV = PMT × (1 − (1 + i)^−n) / i with i = 0.07/12, n = 360 ≈ 480,847 ✓. Example 2 — Tighter front-end budget. Gross income $75,000, monthly debts $200, down payment $15,000, rate 6.5%, DTI 28% (front-end). Step 1: max = (75,000/12) × 0.28 = $1,750. Step 2: 1,750 − 200 = $1,550 available for principal + interest. Step 3: $1,550 at 6.5%/12 over 360 months → loan ≈ $245,200. Max price ≈ $260,200. In a metro where tax + insurance add $400/month, knock another ~$63k off the price (loan-equivalent of $400/month) to stay within the same monthly cap.
Frequently asked questions
Which debt-to-income ratio should I enter?
DTI is the most consequential input in this model, and lenders use two flavours. Front-end DTI counts only housing costs (PITI) against gross income — the classic guideline is 28%. Back-end DTI counts all recurring debt including the new mortgage and is what most lenders actually underwrite to — conventional caps run 36–43%, FHA stretches to 45–50% with compensating factors, and VA goes higher still. For a realistic cap that you will not be miserable carrying, use a back-end ratio between 36% and 40%; above that, you are technically qualifying but giving up most of your monthly flexibility. If you are unsure, start with 36% and increase only if your job is stable and you have no childcare, medical, or savings goals competing for cash.
Why does my pre-approval letter give a different number than this calculator?
Pre-approval letters use the lender's own underwriting model, which always includes property tax, homeowners insurance, PMI (if down payment is < 20%), and sometimes HOA dues in the monthly cost — all of which this calculator omits. They also use a current daily rate quote rather than the round number you typed, and they verify income with W-2s rather than trusting your input. The net result is usually a pre-approval number 10–25% lower than this calculator's output, especially in high-tax states (NJ, IL, TX) where property tax alone can be 2–3% of home value per year. Treat this calculator as the optimistic upper bound and the pre-approval as the realistic one.
What are the most common mistakes when using an affordability calculator?
The biggest mistake is using gross income without remembering that taxes and withholdings consume 25–35% of it — your actual take-home cannot support the payment the calculator suggests if you push DTI to 43%. The second is omitting variable monthly costs lenders ignore but you cannot: childcare, retirement saving, health-insurance premiums paid out of pocket, and lifestyle expenses. The third is forgetting that PITI is not just principal and interest; in many US markets property tax + insurance equals 25–40% of the P&I payment, so the headline loan amount overstates affordability. The fourth is anchoring on the maximum number — just because you can borrow $500k does not mean you should. The fifth is using a teaser rate (a 5/1 ARM start rate, or a buy-down rate) instead of the rate that will apply long term, which can shrink real affordability dramatically when the rate resets.
When should I NOT rely on this calculator?
Skip it for non-30-year products — 15-year fixed mortgages have higher monthly payments at the same loan size, so this 360-month model overstates affordability. Avoid it for ARMs, interest-only loans, or any product where the long-term rate differs from the quoted start rate; you need a payment-shock-aware calculator instead. Do not rely on it for high-tax jurisdictions (NJ, IL, TX, NH) without manually building tax and insurance into a more complete PITI calculation. It is also wrong for self-employed buyers whose lender will use two-year average net income (not gross), often producing a much lower qualifying number than the calculator suggests. Finally, ignore it for high-DTI strategies where you plan to rent out part of the home or take roommates — lender treatment of that income is restrictive and varies by program.
How do property taxes, insurance, and PMI change the real maximum?
PITI (principal + interest + tax + insurance, and PMI if applicable) is what lenders actually compare to your DTI cap, so adding those costs effectively shrinks the principal you can support. A useful rule: every $100/month of tax + insurance + PMI reduces the supportable loan by roughly $15,000 at 6.5% over 30 years. In high-tax states where property tax alone runs 2–3% of home value per year, the impact is massive — a $500k house in NJ might carry $10,000–$15,000 of annual property tax, which is $830–$1,250 per month consumed before the mortgage. PMI typically adds another 0.5–1.5% of the loan amount per year for buyers below 20% down. The honest cap is whatever PITI fits your DTI target, not the headline P&I-only number this calculator returns.