House Affordability Calculator — How Much Can I Afford?

How House Affordability Works

Max Loan = MaxPI × [1 − (1 + r/12)^−n] ÷ (r/12)

Working backward from your DTI limit: Monthly Income × DTI Percent − Existing Debts = Max Housing Payment. Subtract estimated taxes and insurance (~20% buffer) to get Max P&I. Then reverse the standard mortgage payment formula to determine the maximum loan amount and home price you can afford.

DTI Ratios

Front-End & Back-End DTI — Back-end DTI = (all debts including housing) / gross monthly income. Front-end DTI = housing only / income. The 28/36 rule is standard: housing ≤ 28%, all debts ≤ 36%. Most lenders cap DTI at 43% (FHA/Fannie Mae maximum).

PITI

Total Housing Payment — Principal, Interest, Taxes, and Insurance — the four components of the true monthly cost of homeownership. This calculator reserves approximately 20% of the maximum housing payment for taxes and insurance as a reasonable estimate.

PMI

Private Mortgage Insurance — Required by lenders when your down payment is less than 20% of the purchase price. It protects the lender (not you) against default and typically costs 0.5-1.5% of the loan amount per year, adding $50-$200 or more to your monthly payment.

How to Use

1. Enter your combined annual household gross income (before taxes and deductions).
2. Enter all your current monthly debt payments — auto loans, student loans, minimum credit card payments, personal loans.
3. Enter how much you have available for a down payment — larger down payments reduce or eliminate PMI.
4. Select your comfort level with debt. Conservative 28% is safest; Moderate 36% is common; Aggressive 43% is the FHA/Fannie Mae maximum.
5. Enter the current mortgage interest rate and desired loan term to see your maximum affordable home price.

Common Uses

• •Determine the maximum home price you can qualify for based on your income, existing debts, and available down payment.
• •Compare how different DTI comfort levels — conservative, moderate, or aggressive — affect your home buying budget.
• •Plan your home search by understanding how interest rates and loan terms translate into a maximum affordable purchase price.

Understanding the Result

This calculator works backward from your income — the same approach lenders use when evaluating mortgage applications. The key number is the back-end DTI, which measures all your monthly debts (including the proposed mortgage payment) as a percentage of gross monthly income. A 36% DTI on a $100,000 annual income means you can have $3,000/month in total debt payments. If you already pay $500 in existing debts, you have $2,500 available for housing. Subtracting estimated taxes and insurance ($400-$600 on a typical home, depending on location) leaves your maximum principal and interest payment. That payment is then reversed through the mortgage formula to determine the maximum loan amount and, when combined with your down payment, the maximum home price you can afford.

Frequently Asked Questions

What is the 28/36 rule?

This is a traditional lender guideline stating that your housing payment should not exceed 28% of gross monthly income (front-end ratio), and all debt payments combined should not exceed 36% of gross income (back-end ratio). While government-backed loans like FHA may allow up to 43% DTI, following the 28/36 rule provides a financial cushion and significantly reduces the risk of becoming "house-poor" — where most of your income goes to housing costs with little left for savings, emergencies, and other goals.

Does this include property taxes and insurance?

Yes, this calculator reserves approximately 20% of the maximum housing budget for property taxes and homeowners insurance. However, actual property tax rates vary significantly by location — from under 0.5% of home value annually in some areas to over 2.5% in others. For a more precise estimate, look up your local county property tax rate and get insurance quotes for the specific property.

What is PMI and when can I avoid it?

Private Mortgage Insurance protects the lender (not you) when your down payment is less than 20% of the purchase price. It typically costs 0.5-1.5% of the loan amount per year, adding $50-$200 or more to your monthly payment. You can avoid PMI by saving a 20% down payment, using a conventional loan with a "piggyback" second mortgage (80/10/10 structure), or using certain loan programs like VA loans which do not require PMI.

Should I max out what the calculator allows?

Not necessarily. The calculator shows the maximum loan amount the bank would approve, not what is most comfortable for your lifestyle. Lenders may approve you at 43% DTI, but many financial advisors suggest targeting 28-33% to maintain flexibility for retirement savings, emergencies, travel, and other life goals. Consider your full financial picture, not just the approval maximum.

How much should I put down on a house?

The traditional recommendation is 20% to avoid PMI, but many buyers put down less. FHA loans allow as little as 3.5% down, and conventional loans may allow 3-5% for qualified buyers. A larger down payment means lower monthly payments, less total interest, and no PMI. However, it is also important to keep an emergency fund after closing — depleting all savings for a down payment can be risky.

Sources

• Consumer Financial Protection Bureau
• Federal Housing Finance Agency