House Affordability Calculator
Determine how much house you can afford based on your income, debts, and financial situation.
Calculation Method
Income & Debt Information
Housing costs as % of gross income (typically 28%)
Total debt as % of gross income (typically 36%)
Loan & Property Details
Enter your information to see how much house you can afford
Determining how much house you can afford depends on several key factors including your income, existing debts, down payment, and the current mortgage rates. Lenders typically use two main ratios to evaluate your affordability:
- Front-End Ratio (28% Rule): Your total housing costs should not exceed 28% of your gross monthly income
- Back-End Ratio (36% Rule): Your total debt payments should not exceed 36% of your gross monthly income
1. Monthly Income Calculation
Monthly Income = Annual Income ÷ 12
2. DTI Ratio Limits
Front-End Max = Monthly Income × Front-End Ratio
Back-End Max = (Monthly Income × Back-End Ratio) - Monthly Debts
3. Housing Budget
Max Housing Budget = min(Front-End Max, Back-End Max)
4. Monthly Mortgage Payment
M = L × [r(1+r)^n] / [(1+r)^n - 1]
Where: L = Loan Amount, r = Monthly Rate, n = Number of Payments
5. Total Housing Cost
Total = Mortgage + Property Tax + Insurance + HOA
Example 1: Income-Based Calculation
Scenario: $100,000 annual income, $500 monthly debts, 30-year mortgage at 6%, 20% down payment
Calculation: Monthly income = $8,333, Front-end max = $2,333, Back-end max = $2,500
Result: Max housing budget = $2,333, Affordable house ≈ $420,000
Example 2: Budget-Based Calculation
Scenario: Fixed budget of $2,500/month, same loan parameters as above
Calculation: Housing budget = $2,500 (user-defined)
Result: Affordable house ≈ $390,000
How do lenders decide house affordability?
Lenders use debt-to-income ratios, credit scores, employment history, and down payment amount to determine how much you can borrow. The 28/36 rule is a common guideline, but some lenders may allow higher ratios for qualified borrowers.
What is DTI ratio?
Debt-to-Income (DTI) ratio is the percentage of your monthly gross income that goes toward paying debts. It includes housing costs, credit cards, loans, and other monthly debt obligations.
How does down payment affect affordability?
A larger down payment reduces your loan amount, which lowers your monthly mortgage payment and allows you to afford a more expensive home. It also helps you avoid PMI if you put down 20% or more.
What if interest rates are zero?
If interest rates were zero, your monthly payment would simply be the loan amount divided by the number of months. However, zero interest rates are extremely rare in real-world scenarios.