Before shopping for a new home, determine exactly what you can afford and don’t forget about associated costs like down payments and interest payments.
Home Affordability Calculator
Estimate the maximum home price you can comfortably afford based on your income, existing debts and local costs.
Enter Your Details
Pre‑tax income (e.g., 90000)
Example: 400
Best guess based on today’s rates
Local Cost Assumptions:
What Is a Home Affordability Calculator?
A Home Affordability Calculator helps you answer the big question: “How much house can I realistically afford?” Instead of focusing on loan terms alone, it looks at the complete financial picture:
- Income & Debts (DTI) – Lenders cap your monthly housing cost and total debt at 28 % and 36 % of gross income, respectively.
- Down Payment – A larger down payment lowers the loan amount, reduces PMI, and widens your price range.
- Local Costs – Property taxes, homeowners insurance, HOA dues, and (if <20 % down) PMI.
- Interest Rate & Term – Higher rates or shorter terms mean higher monthly payments, shrinking affordability.
| Expense | Why It Matters | Example (USD) |
|---|---|---|
| Principal | Loan balance reduction | $450 |
| Interest | Cost to borrow | $900 |
| Property Taxes | Local tax on home value | $275 |
| Homeowners Insurance | Protects home & belongings | $120 |
| HOA Fees | Community upkeep | $100 |
| PMI | Required if <20 % down | $80 |
| Total Housing Cost | Must fall ≤ 28 % of gross income | $1,925 |
How We Calculate Affordability
The calculator solves for the highest home price where PITI + HOA + PMI ≤ 28 % of monthly income and (PITI + HOA + PMI + existing debts) ≤ 36 %.
Total Debt ≤ 0.36 × Monthly Income
For each trial home price we compute:
PI (principal + interest) uses the standard mortgage formula with your chosen rate and term.
Key Concepts to Know
Front‑End Ratio
The percentage of gross income that goes to housing expenses. Lenders target ≤ 28 %.
Back‑End Ratio
Housing costs plus all other monthly debt divided by gross income. The standard cap is 36 %.
Debt‑to‑Income (DTI)
Catch‑all term for both ratios. Lower DTI = easier approval & better rates.
Private Mortgage Insurance (PMI)
Added when down payment is under 20 %. Cancels automatically at ≈22 % equity.
5 Ways to Afford a More Expensive Home
- Pay down high‑interest debts – every $100 monthly debt cut raises your housing budget by about $156.
- Boost your credit score – shaving 0.5 % off the rate on a $350 k loan saves ≈$110 per month.
- Add to your down payment – not only lowers PI but may remove PMI entirely.
- Choose a less expensive area – counties with modest property‑tax rates can reduce monthly costs by hundreds.
- Shop multiple lenders – quotes can vary by 0.25–0.50 % APR even with identical credit profiles.
Home Affordability FAQ
Is the 28 / 36 rule always required?
No—FHA, VA and some jumbo lenders may approve higher DTIs (up to 43 %+), but expect stricter underwriting or higher rates.
Should I include future childcare or tuition costs?
Yes. Lenders might not count them, but your own budget should. Aim for a payment you can handle after future expenses.
Does a 15‑year loan change my max price?
Absolutely. Shorter terms raise the PI portion, lowering the maximum affordable price even if the rate is lower.
What if I receive bonuses or gig income?
Lenders normally average variable income over two years. Enter only the amount you can document and expect consistently.