Home Affordability Calculator
Work backwards from your income to the maximum home price a lender is likely to approve, using the debt-to-income ratios that underwriting actually uses.
Your details
How lenders decide what you can afford
Mortgage underwriting comes down to ratios. The front-end ratio, also called the housing ratio, is your total monthly housing cost divided by your gross monthly income. The back-end ratio, or debt-to-income ratio, adds every other recurring debt payment you have. Conventional loans have traditionally looked for a front-end ratio at or below 28 percent and a back-end ratio at or below 36 percent, which is where the 28/36 rule comes from.
Those are guidelines rather than hard limits. Loans backed by Fannie Mae and Freddie Mac commonly allow a back-end ratio up to 45 percent, and FHA loans can go higher still with compensating factors such as a large down payment or substantial cash reserves. What the ratios really measure is how much margin you have, and margin is what protects you when something goes wrong.
'Housing cost' means more than principal and interest. Property tax and home insurance are usually escrowed and collected monthly, and HOA dues are a real monthly obligation. Because tax and insurance scale with the price of the home, the calculator solves for the price at which the total monthly cost hits your limit, rather than simply multiplying your income by a rule of thumb. That is why the answer here tends to be more conservative, and more realistic, than the quick estimates you see elsewhere.
One thing this calculator cannot see is your credit score, which drives the rate you are actually offered, and the rate drives the price you can afford. A half point of rate makes a meaningful difference to the maximum price. Try your scenarios at a rate a little above the best advertised one, since that is closer to what you may be quoted.
How the maximum price is derived
The calculator takes the lower of the two ratio limits, then solves for the home price whose total monthly cost equals it.
| Symbol | Meaning |
|---|---|
Income |
Gross monthly income, annual divided by twelve |
28% |
Front-end housing ratio limit |
36% |
Back-end total debt ratio limit |
Other debts |
Car loans, student loans, minimum card payments and similar |
Because property tax and mortgage insurance are percentages of the price, they cannot simply be subtracted afterwards. The calculator solves the resulting equation algebraically for price, so the ratio it reports is the ratio that actually applies.
Worked example: 100,000 dollars a year
Gross income of 100,000 dollars a year, 500 dollars of monthly debt payments, 40,000 dollars saved, at 6.5 percent over 30 years with 1.2 percent property tax.
| Figure | Result |
|---|---|
| Gross monthly income | $8,333.33 |
| Maximum housing payment | $2,333.33 |
| Maximum home price | $314,857.35 |
| Mortgage required | $274,857.35 |
| Principal & interest | $1,737.29 |
| Property tax | $314.86 |
| Home insurance | $150.00 |
| Total monthly cost | $2,333.33 |
| Housing ratio | 28.0% |
| Total debt ratio | 34.0% |
| Left after housing and debts | $5,500.00 |
The housing ratio binds here, not the debt ratio: 28 percent of 8,333.33 dollars is 2,333.33 dollars, while the 36 percent limit would have allowed 3,000 dollars minus the 500 dollars of other debts, or 2,500 dollars. Note that the 40,000 dollar down payment is 12.7 percent of the price, which is below the 20 percent threshold, so mortgage insurance would apply in practice and would reduce the affordable price a little further.
Estimates only. Your lender's figures may differ because of fees, escrow and rounding.
Buying below your maximum
Treat the maximum as a ceiling, not a target
The number this calculator produces is what a lender will approve, which is not the same as what you should spend. Buying at 80 percent of your maximum leaves room for the costs of ownership that nobody warns you about: maintenance, repairs, higher utility bills and furnishing a larger space.
Reach 20 percent down if you can
Below 20 percent down you will usually pay mortgage insurance, which protects the lender rather than you and does not reduce your balance. It commonly costs between 0.5 and 1.5 percent of the loan a year. Reaching the 20 percent threshold can free up more each month than the extra saving costs you.
Clear small debts before you apply
Paying off a 300 dollar monthly car loan raises your borrowing capacity by far more than 300 dollars, because it removes the payment from the back-end ratio for the entire term. Even a modest debt can move your maximum price by tens of thousands.
Budget for closing costs separately
Closing costs typically run 2 to 5 percent of the purchase price and are paid in addition to the down payment. If your 40,000 dollars is everything you have, you cannot put all of it down. Keep a reserve, because moving into a home reliably costs more than the paperwork suggests.
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Frequently asked questions
How much house can I afford on 100,000 dollars a year?
Using the 28/36 guideline with 500 dollars of other monthly debts, 40,000 dollars down and a 6.5 percent rate, roughly 314,000 dollars. The answer moves a lot with your existing debts, the rate you are offered and local property taxes, so run your own figures rather than relying on a rule of thumb.
What is the 28/36 rule?
A traditional lending guideline: your housing costs should not exceed 28 percent of gross monthly income, and all debt payments together should not exceed 36 percent. Many conventional loans now allow a back-end ratio up to 45 percent, so treat 36 percent as a prudent target rather than a legal limit.
Does my credit score affect how much I can afford?
Indirectly and significantly. The score determines the interest rate you are offered, and a higher rate means a larger payment for the same loan, which lowers the price you can afford. Try this calculator twice with rates half a point apart to see the difference.
Should I include my partner's income?
If you are both on the mortgage and both contributing, yes, because lenders will consider both incomes. Enter your combined gross income. Be aware that a larger joint loan is also a larger joint obligation if circumstances change.
Why is my affordable price lower than other calculators show?
Most quick calculators apply a simple income multiple and ignore property tax and insurance. Those costs scale with the price of the home, so including them correctly reduces the figure. This calculator also reports the debt-to-income ratio you would actually end up with, so you can see how much headroom remains.