Home Loan Affordability Calculator
Estimates the maximum home price you can afford based on income, existing debts, and available down payment. Ideal for first-time buyers setting a realistic budget before house hunting.
Last updated: September 2026
Formula below · 2 sources (CFPB, Wikipedia) · Updated Sep 2026
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About this calculator
Lenders traditionally use the 28/36 rule: your housing payment should be no more than 28% of gross monthly income (the front-end debt-to-income ratio), and your housing payment plus all other monthly debt payments no more than 36% (the back-end ratio). This calculator takes the smaller of the two limits as your maximum monthly payment: Max Payment = min(Monthly Income × 0.28, Monthly Income × 0.36 − Monthly Debts). It then converts that payment into the largest 30-year fixed loan it can repay at your interest rate, using the present value of an annuity: Max Loan = Max Payment × [1 − (1 + r)^−360] / r, where r is the annual rate ÷ 12. Adding your down payment gives the maximum home price. The whole payment is treated as principal and interest; property tax, homeowner's insurance, PMI and HOA dues also count toward the 28%, so subtract their monthly total from the budget for a tighter figure. Lenders also weigh credit score, reserves and loan type, and some programs allow higher ratios.
How to use
Assume a monthly gross income of $7,000, monthly debts of $400, a $40,000 down payment, and a 6.5% interest rate. Front-end limit: $7,000 × 0.28 = $1,960. Back-end limit: $7,000 × 0.36 − $400 = $2,120. The lower limit, $1,960, is your maximum payment. At 6.5% over 30 years each $1 of monthly payment supports about $158.21 of loan, so the maximum loan is $1,960 × 158.21 ≈ $310,093. Add the down payment: $310,093 + $40,000 ≈ $350,093 maximum home price. If your debts were $900 a month, the back-end limit ($2,520 − $900 = $1,620) would bind instead and the price would fall to about $296,300.
Frequently asked questions
What percentage of my income should I spend on a mortgage payment?
Most financial advisors and lenders recommend keeping your monthly housing costs—principal, interest, taxes, and insurance—below 28% of your gross monthly income. Some loan programs allow up to 31% for housing costs or 43% for all debts combined. Staying closer to 25% gives you a larger financial cushion for maintenance, emergencies, and retirement savings. The right percentage depends on your job stability, other financial goals, and local cost of living.
How do existing debts reduce the home price I can afford?
Every dollar you already commit to monthly debt payments (car loans, student loans, credit cards) reduces the amount available for housing under the 28% DTI guideline. For example, $400 in monthly debts directly reduces your maximum loan capacity by $400 per month, which—at a 6.5% rate over 30 years—translates to roughly $63,000 less in purchasing power. Paying down high-interest debts before applying for a mortgage is one of the most effective ways to increase your home budget. Lenders verify all recurring debts on your credit report.
Why does my down payment amount change how much home I can afford?
The down payment reduces the loan amount you need to borrow, so a larger down payment stretches your purchasing power beyond what your income alone supports. Additionally, a down payment of at least 20% eliminates private mortgage insurance (PMI), which can add $100–$200/month to your costs. A bigger down payment also typically secures a lower interest rate, further increasing affordability. However, depleting all savings for a down payment can leave you vulnerable to repair costs, so balance is key.