Home Affordability Calculator
How This Calculator Works
Maximum Monthly Housing Payment = (Gross Monthly Income x Max DTI%) - Existing Monthly Debts
Maximum Home Price is derived from:
Housing Payment = P&I + Property Tax + Insurance + PMI + HOA
Where P&I = Loan Amount x [ r(1+r)^n ] / [ (1+r)^n - 1 ]
Loan Amount = Home Price - Down Payment
Property Tax = Home Price x Tax Rate / 12
PMI = Loan Amount x PMI Rate / 12 (if down payment < 20%)A home affordability calculator helps you determine the maximum home price you can comfortably purchase based on your financial situation. Lenders use your debt-to-income (DTI) ratio as the primary measure of what you can afford, and this calculator mirrors that same approach to give you a realistic picture of your buying power.
How the Calculation Works
The calculator starts with your gross monthly income and applies your chosen maximum debt-to-income ratio (typically 36% for conventional loans, though some lenders allow up to 43% or even 50% for FHA and VA loans). This gives your maximum total monthly debt payment. After subtracting your existing monthly debts (car payment, student loans, credit cards, and other obligations), the remaining amount is available for housing costs.
Your total housing payment includes principal and interest on the mortgage, property taxes, homeowner's insurance, private mortgage insurance (PMI) if your down payment is less than 20%, and any HOA fees. The calculator works backward from your maximum housing payment to determine the highest home price you can afford by accounting for each of these costs as a function of the home price or loan amount.
Understanding Debt-to-Income Ratios
Lenders typically use two DTI ratios. The front-end ratio (or housing ratio) looks at housing costs alone and should generally stay below 28%. The back-end ratio (used by this calculator) considers all debts and is usually capped at 36% for the best rates, though many programs allow higher ratios. A lower DTI ratio not only increases your chances of loan approval but may also qualify you for better interest rates.
The Role of Down Payment
Your down payment directly affects how much home you can afford. A larger down payment means a smaller loan, which reduces your monthly payment and may eliminate PMI. If your down payment is less than 20% of the home price, lenders typically require PMI, which adds 0.3% to 1.5% of the loan amount per year to your monthly costs. This calculator automatically factors PMI in when applicable.
Beyond the Numbers
While this calculator shows you the maximum price a lender might approve, financial experts recommend keeping your total housing costs (including taxes, insurance, and maintenance) to no more than 25-30% of your take-home pay. Remember to budget for closing costs (2-5% of the home price), moving expenses, furniture, and an emergency fund of at least 3-6 months of expenses. Buying less house than you can qualify for gives you more financial flexibility and a greater cushion for unexpected expenses.
Frequently Asked Questions
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What You Should Know
Making Smart Home Buying Decisions
Purchasing a home is the largest financial commitment most people make in their lifetime. Understanding exactly how much home you can afford before you start shopping prevents the heartbreak of falling in love with a property that is beyond your budget — and protects you from the long-term consequences of overextending your finances.
The True Cost of Stretching Your Budget
When housing costs consume too large a share of your income, the effects ripple through every aspect of your financial life. You may struggle to save for retirement, build an emergency fund, or handle unexpected expenses like car repairs or medical bills. Studies show that households spending more than 30% of gross income on housing are considered "cost-burdened" by the Department of Housing and Urban Development, and those spending more than 50% are "severely cost-burdened."
For example, on a $85,000 salary, a 36% DTI ratio allows roughly $2,550 per month for all debt payments. After subtracting $650 in existing debts, you have about $1,900 available for housing. But stretching to a 43% DTI would give you roughly $2,395 for housing — a difference that could mean $80,000 or more in home price. The question is whether that larger home is worth the tighter monthly budget.
Strategies to Increase Your Buying Power
If the calculator shows a lower number than you hoped for, there are concrete steps you can take. Paying off a car loan or credit card balance directly increases your available housing payment. Improving your credit score by even 40-60 points can lower your interest rate by 0.25-0.5%, which translates to thousands more in purchasing power. Saving a larger down payment reduces PMI costs and lowers the loan amount, letting you afford a higher-priced home within the same monthly budget.
Consider your timeline as well. If you plan to buy in 12-18 months, you may have time to pay down debts, build savings, and improve your credit. Use this calculator to model different scenarios and set specific financial goals that will put your target home within reach.