House Affordability Calculator
Determining how much house you can afford is the most critical first step in the home-buying journey. Our House Affordability Calculator goes beyond simple estimates to give you a realistic budget based on the key factors lenders use your:
- income
- monthly debts
- down payment
- estimated costs of homeownership
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When entering your "Monthly Debt", be sure to include all recurring payments like car loans, student loans, minimum credit card payments, and personal loans. Do not include monthly expenses like utilities, groceries, or insurance premiums.
This tool is designed for first-time homebuyers mapping out their budget, current homeowners looking to upgrade, and anyone curious about the salary needed to buy a house in today's market.
How to Calculate Your Home Affordability
- Enter Your Finances: Input your annual gross income, total monthly debts, and your target Debt-to-Income (DTI) ratios.
- Provide Down Payment: Enter the total amount you have saved for a down payment.
- Estimate Loan & Housing Costs: Adjust the loan term, interest rate, and other housing costs like taxes and insurance.
- Analyze Your Results: The calculator will instantly show the maximum home price you can likely afford based on your chosen loan term, and the chart will compare this across different terms.
Your Financial Details
Loan & Housing Estimates
How Much House Can You Afford
How Home Affordability is Calculated
Lenders primarily use **Debt-to-Income (DTI) ratios** to determine how much they're willing to lend you. This calculator lets you set your own DTI targets to see how different levels of risk affect your budget.
- Front-End Ratio (Housing Costs): This is the percentage of your gross monthly income that goes toward housing expenses (mortgage principal and interest, property taxes, home insurance, HOA, PMI). A conservative target is **28% or less**.
- Back-End Ratio (Total Debt): This is the percentage of your income that goes toward all of your debt obligations, including your new housing payment plus existing debts. Lenders generally require this to be **36% or less**, though some loan programs may allow up to 43% or more.
Our calculator finds the maximum monthly housing payment that satisfies both of your target DTI ratios. From that payment, it works backward to determine the total loan you can support, and by adding your down payment, we arrive at the maximum affordable home price.
Use Cases and Examples
Scenario 1: The Impact of High Debt
Profile: Alex earns $90,000/year and has a $50,000 down payment. However, Alex also has a $700/month car payment and a $400/month student loan payment ($1,100 total monthly debt).
Result: Using the standard 36% back-end DTI, Alex's affordability is significantly reduced. The calculator shows a maximum home price of around **$285,000**. This highlights how non-housing debt directly limits your home-buying power.
Scenario 2: The Power of Low Debt
Profile: Ben also earns $90,000/year with a $50,000 down payment. However, Ben has paid off all other loans and has $0 in monthly debt.
Result: With no other debt payments, Ben's entire borrowing capacity can go towards a mortgage. The calculator shows a maximum home price of around **$425,000**—a difference of $140,000 compared to Alex, despite having the same income and down payment.
Calculation Verification & Edge Cases
Edge Case 1: No Debt, No Extra Costs
- Inputs: Income: $100,000, Down Payment: $20,000, Monthly Debt: $0, DTI Ratios: 28/36, Term: 30, Interest: 7%, All other costs: 0.
- Logic Check: Max monthly payment (36% of $8,333/mo income) = $3,000. A $3,000/mo P&I payment at 7% for 30 years supports a loan of ~$451,000. Add the $20k down payment.
- Expected Result: Max Home Price should be ~$471,000. Our calculator shows **$470,985**, which is correct.
Edge Case 2: High Property Tax Impact
- Inputs: Same as above, but with a 3% Property Tax.
- Logic Check: A $400,000 home would have $1,000/mo in property taxes. This eats into the $3,000 max payment, leaving only $2,000 for P&I. This supports a much smaller loan.
- Expected Result: The affordable home price should drop significantly. Our calculator shows it drops to **$320,537**, demonstrating the powerful impact of property taxes.
Frequently Asked Questions (FAQs)
What is PMI and when do I have to pay it?
Private Mortgage Insurance (PMI) is typically required by lenders when you make a down payment of less than 20% of the home's purchase price. It protects the lender in case you default on the loan. The cost is usually a percentage of the loan amount per year, paid monthly.
How much does my credit score affect affordability?
Your credit score is a major factor. A higher score qualifies you for a lower interest rate, which directly increases how much you can afford to borrow. A lower interest rate means a smaller portion of your monthly payment goes to interest, allowing for a larger loan principal.
Are the DTI ratios I enter a strict rule?
They are guidelines. Lenders have their own specific rules, but setting your own targets helps you plan. A lower DTI means less financial risk. Some loan programs (like FHA) may allow higher DTI ratios than the standard 28/36, so you can adjust these inputs to explore those scenarios.