Home Affordability Calculator
Find out the maximum home price you can realistically afford based on your gross income, existing debts, down payment, and mortgage rate. Use it before you start house-hunting to set a confident budget.
About this calculator
Lenders use a debt-to-income (DTI) ratio to cap how much of your gross monthly income can go toward total debt payments. The standard ceiling is 43%, though many lenders prefer 36%. The calculator first converts your annual gross income to monthly, multiplies by the DTI ratio to get the maximum allowable monthly debt, then subtracts your existing monthly debts (car, student loans, etc.) to isolate how much is left for a mortgage payment. That available payment amount is then run through the reverse amortization formula to find the loan principal it supports: Loan = Payment × (1 − (1 + r)^−360) / r, where r = annual rate ÷ 12 and 360 assumes a 30-year term. Your down payment is added to that loan amount to arrive at the maximum affordable home price.
How to use
Assume $90,000 annual gross income, $400/month in existing debts, $30,000 down payment, 7% interest rate, and a 43% DTI limit. Monthly gross = $90,000/12 = $7,500. Max total debt = $7,500 × 0.43 = $3,225. Available for mortgage = $3,225 − $400 = $2,825. Monthly rate r = 7/100/12 ≈ 0.005833. Loan = $2,825 × (1 − (1.005833)^−360) / 0.005833 ≈ $424,800. Add down payment: $424,800 + $30,000 = $454,800 maximum home price.
Frequently asked questions
What debt-to-income ratio do lenders use when approving a mortgage?
Most conventional lenders use a back-end DTI limit of 43%, meaning total monthly debt payments (mortgage, car, student loans, credit cards) should not exceed 43% of gross monthly income. Some loan programs, like FHA, may allow up to 50% with compensating factors such as strong credit or large reserves. A front-end DTI, which covers only housing costs, is typically capped at 28–31%. Using a conservative DTI in this calculator gives you a realistic ceiling that aligns with real underwriting standards.
How much does my down payment affect home affordability?
A larger down payment directly increases your buying power in two ways: it reduces the loan amount required and can eliminate PMI if you reach 20% of the purchase price. In the affordability formula, the down payment is added on top of the loan amount the mortgage payment can support, so every extra dollar saved translates one-for-one into a higher maximum purchase price. For example, increasing your down payment from $20,000 to $40,000 raises your affordable price ceiling by exactly $20,000. It can also qualify you for a lower interest rate, which further expands affordability.
Why does my current monthly debt load reduce how much house I can afford?
Lenders evaluate your total debt burden, not just the mortgage, against your income. If you already carry $600/month in car and student loan payments, that $600 reduces the portion of your DTI allowance available for a mortgage payment. On a $7,500 monthly gross income with a 43% DTI cap, $600 in existing debts shrinks the mortgage budget from $3,225 to $2,625, potentially reducing your affordable home price by $50,000 or more. Paying down existing debts before applying for a mortgage is one of the most effective ways to increase your buying power.