House Affordability Calculator
How this house affordability calculator works
This house affordability calculator estimates a comfortable home price and monthly payment based on your income, monthly debts, down payment, loan details, and typical lender guidelines. It is designed to mirror how many lenders think about affordability, without being a loan offer or approval.
You enter your gross annual income plus any documentable extra income, such as bonuses or rental income. The tool converts this to a monthly income figure, then subtracts your ongoing monthly obligations like car loans, student loans, credit card minimums, and other debts. With your expected interest rate, loan term, property taxes, insurance, HOA fees, and target down payment, it estimates a maximum monthly housing payment and a corresponding home price.
The calculator uses two common lending tests: a housing-only ratio (front-end DTI) and a total-debt ratio (back-end DTI). It finds the lower of the two affordable payment amounts, because that is typically closer to what an underwriter would allow.
Key formulas and ratios used
To make the calculation transparent, here are the main steps and formulas behind the results.
1. Monthly income
Annual income is converted to monthly income and combined with any additional monthly income you enter:
2. Front-end DTI (housing ratio)
The front-end debt-to-income ratio compares your proposed monthly housing cost to your gross monthly income:
Max Housing Payment (front-end) = (Max Front-End DTI % × Monthly Income)
Housing cost includes principal and interest, property taxes, homeowners insurance, and HOA dues.
3. Back-end DTI (total-debt ratio)
The back-end DTI compares all of your monthly debts plus the new housing payment to your gross monthly income:
Max Total Debt = (Max Back-End DTI % × Monthly Income)
Max Housing Payment (back-end) = Max Total Debt − Other Monthly Debts
4. Mortgage payment and home price
Once the calculator determines the lower of the front-end and back-end housing payment limits, it treats that amount as the maximum affordable monthly housing cost. It then subtracts estimated taxes, insurance, and HOA fees to isolate the portion available for principal and interest.
A standard fixed-rate mortgage payment formula is used to find the loan amount that fits that principal and interest budget, given your interest rate and loan term. Your target down payment percentage or dollar amount is then applied to estimate a total home price.
Interpreting your results
Your results typically include:
- Estimated maximum home price: An upper bound on the price of a home that may fit common affordability guidelines.
- Estimated monthly payment: A breakdown of principal and interest, property taxes, homeowners insurance, and HOA fees if applicable.
- Front-end and back-end DTI ratios: Your housing-only and total debt-to-income ratios based on the inputs you provided.
If your back-end DTI is much higher than your front-end DTI, your existing debts (car loans, student loans, credit cards, and other obligations) are driving the limit. Paying down debts before buying may increase your affordable home price.
If your front-end DTI is the binding factor, your income and housing costs (taxes, insurance, HOA) are the main constraint. In that case, adjusting your target property tax rate, shopping for better insurance quotes, or looking in areas with lower HOA fees may improve affordability.
Many people choose to stay below the maximum payment this calculator suggests, leaving room in their budget for savings, maintenance, and lifestyle expenses.
Worked example
Consider a household with the following profile:
- Gross annual income: $100,000
- Additional monthly income: $0
- Monthly debts: $400 car payment, $300 student loans, $100 credit cards, $0 other debts
- Down payment available: $50,000 (target 20%)
- Interest rate: 7.0% on a 30-year fixed loan
- Property tax rate: 1.25%
- Annual homeowners insurance: $1,800
- HOA fees: $0
- Max front-end DTI: 28%
- Max back-end DTI: 36%
Monthly income is about $8,333. With a 28% front-end limit, the maximum housing cost is roughly $2,333. With a 36% back-end limit, total debt can be about $3,000 per month. After subtracting $800 of other monthly debts, the back-end allows about $2,200 toward housing. Because $2,200 is lower than $2,333, the back-end DTI becomes the binding constraint.
The calculator then backs out estimated taxes and insurance from that $2,200, finds the principal and interest portion that fits your 7.0% rate over 30 years, and estimates a loan amount and corresponding home price. With a 20% down payment, this example might support a home price in the mid-$300,000s, depending on the exact tax and insurance assumptions.
Your own results will vary based on your location, down payment, and credit profile, but the structure of the calculation will be similar.
Common lender guidelines compared
Every lender sets its own rules, but many follow similar ranges for debt-to-income ratios. The table below shows typical guideline ranges often used for different loan types. These are not guaranteed limits, but they help you understand why the calculator uses default DTI values in the high 20s to mid 30s.
| Loan type | Typical front-end DTI range | Typical back-end DTI range | Notes |
|---|---|---|---|
| Conventional | 25%–29% | 33%–45% | Stronger credit and larger down payments may allow higher DTIs. |
| FHA | Up to low 30s% | Up to mid 40s%–low 50s% | More flexible guidelines, but includes mortgage insurance premiums. |
| VA | Often no strict front-end cap | Common benchmark around 41% | Focuses on residual income as well as DTI. |
| USDA | Around 29% | Around 41% | Income and property location limits apply. |
The default DTI values in the calculator are conservative starting points. You can adjust them to explore different scenarios, but qualification will still depend on a specific lender and program.
Assumptions and limitations
This tool is for educational and planning purposes only. It does not pre-qualify you for a mortgage, does not check your credit, and is not an offer to lend. Actual approval amounts can differ significantly from these estimates.
- DTI guidelines: The front-end and back-end DTI percentages used here are typical ranges, not hard rules. Lenders may approve higher or lower ratios based on credit score, reserves, loan type, and manual underwriting.
- Taxes, insurance, and HOA: Property tax rates, homeowners insurance, and HOA fees are entered as estimates and can vary widely by location, property type, and coverage choices.
- Interest rates: The interest rate you enter is a user-supplied assumption and may not match the rate you ultimately qualify for. Small changes in rate can materially change your maximum affordable home price.
- Other costs: Closing costs, mortgage insurance, utilities, maintenance, and repairs are not fully reflected in the affordability estimate. You may want to leave extra room in your budget to cover these items.
- Household variation: This calculator assumes a standard fixed-rate mortgage structure and typical underwriting. Self-employed borrowers, jumbo loans, non-traditional income, and special programs may be evaluated differently.
Before making any purchase decisions, discuss your situation with a licensed mortgage professional who can review your full credit profile, documentation, and loan options.
Using this calculator alongside other tools
To get the most out of this house affordability calculator, consider pairing it with other tools and resources. A dedicated mortgage payment calculator can help you compare different loan amounts, rates, and terms in detail. A debt-to-income ratio calculator can make it easier to see how paying off certain debts or consolidating loans might change your affordable home price.
Use this affordability estimate as a starting point to set a price range, then refine it by adjusting your assumptions and reviewing quotes from lenders for interest rates, mortgage insurance, and closing costs.
How Much House Can You Afford? A Complete Guide
Determining how much house you can afford involves more than just qualifying for a mortgage—it requires balancing what lenders will approve with what fits comfortably in your budget. This comprehensive guide explains the key factors that determine your buying power, the formulas lenders use, and strategies to maximize your home purchasing potential while maintaining financial health.
The Two Key Affordability Constraints
Lenders evaluate your ability to afford a home using two primary metrics:
1. Front-End Debt-to-Income Ratio (Housing Ratio)
The front-end DTI measures housing costs relative to your gross income. It includes Principal, Interest, Taxes, and Insurance (PITI), plus any HOA fees:
Standard maximum: 28% for conventional loans
2. Back-End Debt-to-Income Ratio (Total DTI)
The back-end DTI includes housing costs plus all other monthly debt obligations:
Standard maximum: 36% (conservative) to 43% (Qualified Mortgage limit) to 50% (FHA with compensating factors)
DTI Limits by Loan Type
| Loan Type | Front-End Max | Back-End Max | Notes |
|---|---|---|---|
| Conventional | 28% | 36-45% | Higher limits with strong credit/reserves |
| FHA | 31% | 43-50% | 50% with compensating factors |
| VA | None | 41% | Uses residual income test too |
| USDA | 29% | 41% | Income limits apply |
| Jumbo | 28% | 36-43% | Stricter requirements |
The Home Affordability Formula
Your maximum affordable home price is calculated by working backward from your DTI constraints. The process:
- Calculate maximum monthly housing payment using front-end DTI
- Calculate available housing payment after other debts (back-end DTI)
- Take the lower of these two amounts
- Subtract taxes, insurance, PMI, and HOA to get max P&I payment
- Calculate loan amount that produces this P&I payment
- Add down payment to get maximum home price
The monthly Principal and Interest (P&I) payment formula:
Where L is loan amount, r is monthly interest rate, and n is total number of payments.
Understanding PITI: The Four Components
Principal
The portion of each payment that reduces your loan balance. In early years, most of your payment goes to interest; principal increases over time through amortization.
Interest
The cost of borrowing, calculated as the loan balance times the monthly interest rate. Even small rate differences significantly impact affordability:
| Interest Rate | Monthly P&I on $300,000 | Total Interest (30 yr) |
|---|---|---|
| 6.0% | $1,799 | $347,515 |
| 6.5% | $1,896 | $382,633 |
| 7.0% | $1,996 | $418,527 |
| 7.5% | $2,098 | $455,089 |
| 8.0% | $2,201 | $492,256 |
Taxes
Property taxes vary dramatically by location:
- New Jersey: ~2.49% average (highest)
- Illinois: ~2.27%
- Texas: ~1.80%
- California: ~0.76%
- Hawaii: ~0.28% (lowest)
On a $400,000 home, property taxes could range from $1,120/year (Hawaii) to $9,960/year (New Jersey).
Insurance
Homeowner's insurance costs depend on location, home value, coverage amount, and risk factors (flood zones, hurricane areas). Average: $1,500-$3,000 annually for a typical home.
Private Mortgage Insurance (PMI)
If your down payment is less than 20%, most lenders require PMI to protect against default risk:
| Down Payment | LTV Ratio | Typical PMI Rate | Monthly PMI ($300k loan) |
|---|---|---|---|
| 3% | 97% | 0.80-1.50% | $200-$375 |
| 5% | 95% | 0.60-1.20% | $150-$300 |
| 10% | 90% | 0.40-0.80% | $100-$200 |
| 15% | 85% | 0.25-0.50% | $63-$125 |
| 20%+ | 80% or less | None | $0 |
PMI can be removed once you reach 20% equity (80% LTV) for conventional loans. FHA loans require mortgage insurance for the life of the loan unless you put 10%+ down.
Down Payment Strategies
Minimum Down Payment Requirements
- Conventional: 3% minimum (5% for investment properties)
- FHA: 3.5% minimum (580+ credit score)
- VA: 0% (eligible veterans/service members)
- USDA: 0% (rural areas, income limits)
The 20% Down Payment Trade-Off
Putting 20% down eliminates PMI but requires significant savings. Consider:
- Time value: Years of rent while saving vs. building equity now
- Opportunity cost: Could that money earn more invested elsewhere?
- PMI isn't permanent: Can be removed once you hit 20% equity
- Home appreciation: You benefit from price gains on the whole home, not just your down payment
Hidden Costs of Homeownership
Beyond PITI, budget for these ongoing expenses:
| Expense Category | Annual Estimate | Rule of Thumb |
|---|---|---|
| Maintenance/Repairs | $3,000-$10,000+ | 1-3% of home value |
| Utilities | $3,000-$6,000 | Higher than apartment |
| Lawn/Yard Care | $500-$2,500 | DIY vs. service |
| Major Repairs Fund | $1,000-$5,000 | HVAC, roof, appliances |
| Closing Costs (one-time) | $8,000-$25,000 | 2-5% of purchase price |
The 28/36 Rule Explained
The traditional "28/36 rule" provides a conservative affordability guideline:
- 28%: Maximum housing costs as percentage of gross income
- 36%: Maximum total debt payments as percentage of gross income
For a household earning $100,000 annually ($8,333/month):
- Max housing: $8,333 × 28% = $2,333/month
- Max total debt: $8,333 × 36% = $3,000/month
Compensating Factors That Increase Approval Odds
Lenders may approve higher DTIs with these compensating factors:
- Cash Reserves: 6+ months of mortgage payments saved
- Excellent Credit: 740+ FICO score
- Large Down Payment: 20%+ equity at purchase
- Low LTV: Significant home equity
- Stable Employment: 2+ years in same field
- Residual Income: Leftover money after all expenses (VA loans)
- First-Time Homebuyer Programs: State and local incentives
Affordability by Income Level
General guidelines for maximum home price by income (assuming 7% rate, 20% down, 1.25% property tax, good credit, minimal debt):
| Annual Income | Conservative (28/36) | Moderate (31/43) | Aggressive (35/50) |
|---|---|---|---|
| $50,000 | $150,000 | $175,000 | $200,000 |
| $75,000 | $225,000 | $262,000 | $300,000 |
| $100,000 | $300,000 | $350,000 | $400,000 |
| $150,000 | $450,000 | $525,000 | $600,000 |
| $200,000 | $600,000 | $700,000 | $800,000 |
Strategies to Afford More Home
1. Pay Down Existing Debt
Reducing monthly obligations improves your back-end DTI. Paying off a $400/month car payment could increase buying power by $50,000+.
2. Increase Your Down Payment
A larger down payment reduces your loan amount, monthly payment, and eliminates or reduces PMI.
3. Improve Your Credit Score
Better credit qualifies you for lower interest rates. A 0.5% rate reduction on $300,000 saves ~$90/month.
4. Consider a Longer Loan Term
30-year mortgages have lower monthly payments than 15-year, though you pay more interest over time.
5. Explore Low-Down-Payment Programs
FHA, VA, USDA, and conventional 97% programs reduce upfront costs, allowing more cash for the home price.
6. Buy Points to Lower Your Rate
Mortgage points (1 point = 1% of loan) can reduce your rate, lowering monthly payments and improving DTI.
Common Affordability Mistakes
- Maxing Out Approval: Just because you qualify doesn't mean it's comfortable
- Ignoring Future Changes: Will your income/expenses change? Kids, job changes, etc.
- Forgetting Closing Costs: 2-5% of purchase price needed at closing
- Underestimating Maintenance: Homes require ongoing repair investment
- Not Getting Pre-Approved: Know your actual limits before shopping
Frequently Asked Questions
How much income do I need for a $300,000 house?
With 20% down ($240,000 loan), 7% rate, and standard taxes/insurance, you'd need approximately $75,000-$85,000 annual income to qualify under traditional guidelines.
Can I afford a house on a single income?
Yes, many single-income households buy homes. The key is keeping debts low and having a solid down payment. Consider more affordable areas if needed.
Should I buy the most expensive house I qualify for?
Generally no. Leave room for life changes, emergencies, and enjoying your income. Many financial advisors recommend spending 2-3× annual income on a home.
How do bonuses and commissions count toward income?
Lenders typically average 2 years of bonus/commission income and require documentation showing it's likely to continue.
What if my spouse has bad credit?
You can apply solo using only your income and credit. This limits borrowing power but may secure better rates.
The Bottom Line
Home affordability depends on the intersection of your income, existing debts, down payment, local costs, and lender guidelines. While this calculator helps estimate your buying power, the most important consideration is your personal comfort level. A mortgage you can afford on paper but that causes financial stress isn't truly affordable.
We recommend aiming for a total housing payment (PITI + HOA) that leaves comfortable margin for savings, lifestyle, and unexpected expenses—typically keeping housing costs at or below 25% of take-home pay for optimal financial flexibility.