House Affordability Calculator
Estimates the maximum home price you can afford based on your income, existing debts, down payment, and mortgage rate. Use it before house-hunting to set a realistic budget and avoid overextending financially.
About this calculator
This calculator works backwards from your debt-to-income (DTI) ratio — the lender benchmark that limits total monthly debt payments to a percentage of gross income. The maximum allowable monthly mortgage payment is: maxPayment = (monthlyIncome × DTI% / 100) − monthlyDebt. That payment is then converted to a maximum loan amount using the present-value-of-annuity formula: maxLoan = maxPayment / [r / (1 − (1+r)^−360)], where r = interestRate / 12 / 100 and 360 assumes a 30-year term. Finally, the full affordable home price accounts for the down payment: homePrice = maxLoan / (1 − downPaymentPercent / 100). Most conventional lenders use a maximum DTI of 43–45%, and the Federal Housing Administration (FHA) allows up to 50% in some cases.
How to use
Monthly income: $7,500; Monthly debt: $400; Down payment: 20%; Interest rate: 6.5%; Max DTI: 43%. Step 1 — Max total monthly debt: $7,500 × 0.43 = $3,225. Step 2 — Available for mortgage: $3,225 − $400 = $2,825. Step 3 — Monthly rate r = 0.065 / 12 ≈ 0.005417. Step 4 — Max loan = $2,825 / [0.005417 / (1 − (1.005417)^−360)] ≈ $2,825 / 0.006321 ≈ $446,922. Step 5 — Home price = $446,922 / (1 − 0.20) = $558,653. You could afford a home priced at roughly $558,650 under these assumptions.
Frequently asked questions
What debt-to-income ratio do I need to qualify for a mortgage?
Most conventional lenders require a back-end DTI (all monthly debts including the new mortgage) of 43% or lower, though some allow up to 45–50% with compensating factors like excellent credit or large cash reserves. FHA loans officially allow up to 43% but approve borrowers up to 50% in certain circumstances. A DTI below 36% is considered strong and will generally qualify you for the best rates. To improve your DTI before applying, focus on paying down existing debts — even eliminating a $200/month car payment can meaningfully increase your affordable home price.
How does my down payment percentage affect how much house I can afford?
A larger down payment increases your affordable home price in two ways. First, it directly reduces the loan amount needed, allowing you to buy a more expensive home within the same monthly payment limit. Second, a down payment of 20% or more eliminates private mortgage insurance (PMI), which typically costs 0.5–1.5% of the loan annually — freeing up budget for principal and interest. For example, going from a 10% to a 20% down payment on a $500,000 home saves you roughly $200–$500/month in PMI alone, which your lender can redirect toward a higher loan approval.
Why does my existing monthly debt reduce the home price I can afford?
Lenders apply the debt-to-income ratio to ALL of your monthly debt obligations — car loans, student loans, credit card minimums, and the proposed mortgage payment combined. Every dollar you already pay toward existing debts reduces the amount available for your mortgage payment within the lender's DTI ceiling. For instance, if your maximum total monthly debt is $3,000 and you carry $600 in existing payments, only $2,400 remains for your mortgage — which could reduce your affordable home price by $75,000–$100,000 depending on the interest rate. Reducing or eliminating high-payment debts before applying is one of the most effective ways to increase your homebuying power.