Mortgage Affordability Calculator

Calculate how much house you can afford based on your income, existing debt, and down payment. This calculator uses the standard 28% and 36% debt-to-income rules to determine your maximum affordable home price and monthly payment.

How Much House Can You Afford?

Affordability depends on several factors:

Income: Your gross annual income
Existing debt: Monthly payments for credit cards, car loans, student loans, etc.
Down payment: Cash you have for down payment
Interest rate: Current mortgage rates
Loan term: 15-year vs 30-year mortgage

The 28% Rule

Your monthly housing costs should not exceed 28% of your gross monthly income.

Formula: Gross Monthly Income × 0.28 = Maximum Housing Payment

Example: $100,000 annual income = $8,333/month × 0.28 = $2,333 max housing payment

This includes: principal, interest, property taxes, insurance, and PMI.

The 36% Rule (Debt-to-Income Ratio)

Your total monthly debt payments should not exceed 36% of your gross monthly income.

Formula: (Housing Payment + Other Debt) ≤ Gross Monthly Income × 0.36

Example: $8,333/month × 0.36 = $3,000 max total debt

If you have $500/month in other debt, max housing payment = $3,000 - $500 = $2,500

Which Rule Applies?

Lenders use the lower of the two calculations. This ensures you can afford your home even with existing debt obligations.

Example Calculation

Scenario: $100,000 Income, $500/month Debt, $50,000 Down Payment

28% Rule: $8,333 × 0.28 = $2,333 max housing payment

36% Rule: $8,333 × 0.36 = $3,000 max total debt

Max housing (36% rule): $3,000 - $500 = $2,500

Use lower: $2,333/month (28% rule is limiting)

At 7% interest, 30-year term: Max loan = ~$350,000

Max home price: $350,000 + $50,000 = $400,000

Factors Affecting Affordability

Income

Higher income = higher affordable home price. Use gross income (before taxes) for calculations.

Existing Debt

More debt = less available for housing. Pay down debt to increase home affordability.

Down Payment

Larger down payment = higher home price you can afford. Also reduces loan amount and may eliminate PMI.

Interest Rate

Lower rates = higher affordable home price (lower monthly payment for same loan amount).

Loan Term

30-year loans have lower monthly payments = higher affordability. 15-year loans have higher payments but less total interest.

Additional Costs to Consider

Property Taxes

Vary by location, typically 1-2% of home value annually. Can significantly impact monthly payment.

Homeowners Insurance

Typically $1,000-2,000/year depending on home value and location. Required by lenders.

PMI (Private Mortgage Insurance)

Required if down payment < 20%. Typically 0.5-1% of loan amount annually. Adds to monthly payment.

HOA Fees

If applicable, can range from $100-500+/month. Must be included in affordability calculations.

Maintenance and Repairs

Budget 1-2% of home value annually for maintenance. Not included in mortgage payment but important to budget.

Improving Your Affordability

Increase Income

Higher salary, side income, or second job increases your affordable home price.

Reduce Debt

Pay off credit cards, car loans, or other debt to free up income for housing.

Save Larger Down Payment

20% down eliminates PMI and reduces loan amount. Saves money long-term.

Improve Credit Score

Better credit = lower interest rates = higher affordability (or lower monthly payment).

Consider Different Areas

Property taxes and home prices vary significantly by location. Moving to lower-cost area increases affordability.

Lender Requirements

Most lenders require:

DTI ≤ 43%: Maximum debt-to-income ratio (some allow up to 50%)
Credit score: Minimum 620 for conventional loans, 580 for FHA
Down payment: 5-20% for conventional, 3.5% for FHA
Employment: Stable income history (2+ years)
Reserves: 2-6 months of payments in savings

Affordability by Income

$50,000 Annual Income

Max housing: ~$1,167/month (28% rule)

Max home price: ~$200,000-250,000 (depending on down payment and rates)

$75,000 Annual Income

Max housing: ~$1,750/month

Max home price: ~$300,000-375,000

$100,000 Annual Income

Max housing: ~$2,333/month

Max home price: ~$400,000-500,000

$150,000 Annual Income

Max housing: ~$3,500/month

Max home price: ~$600,000-750,000

Tips for Home Buyers

Get pre-approved: Know your exact budget before house hunting
Don't max out: Leave room in budget for maintenance and emergencies
Consider all costs: Taxes, insurance, PMI, HOA, maintenance
Emergency fund: Keep 3-6 months expenses separate from down payment
Shop around: Compare rates from multiple lenders
Negotiate: Don't automatically accept the maximum you can afford

Common Mistakes

Using net income: Use gross income for calculations
Ignoring other costs: Forgetting taxes, insurance, PMI, HOA
Maxing out budget: No room for maintenance or emergencies
Not accounting for debt: Existing loans reduce affordability
Underestimating taxes: Property taxes vary significantly

Home Buying Tip: While these rules help determine what you can afford, consider what you're comfortable paying. Many financial advisors recommend keeping housing costs below 25% of take-home pay (after taxes) for more financial flexibility. Don't stretch to the maximum - leave room in your budget for savings, emergencies, and life's unexpected expenses!

Mortgage Affordability Calculator