Home Affordability Calculator

About the Home Affordability Calculator

How much house can you afford? Lenders answer with debt-to-income ratios. A healthier answer also considers your savings rate, lifestyle, and how much risk you want to carry. This calculator gives you the lender's number; this page tells you when to trust it and when to ignore it.

The Formula

Max housing payment ≈ Gross monthly income × 0.28. Max total debt ≈ Gross monthly income × 0.36. From the housing payment, back out the loan: Loan = (Payment − Taxes − Insurance) × (1 − (1+r)^−n) ÷ r, then add your down payment to get max home price.

Worked Example

Household income $120,000/year = $10,000/month gross. Conservative housing budget: $10,000 × 0.28 = $2,800/month including taxes and insurance. At 6.75% for 30 years with $400/month taxes and $100 insurance: principal-and-interest budget is $2,300, supporting a loan of about $354,000. Add a $80,000 down payment → max home price ≈ $434,000.

The 28/36 rule and where it breaks

28% of gross income for housing (PITI) and 36% for total debt is a conservative target. Most lenders will stretch to 43% DTI for conventional loans, 50% for FHA. Just because they will lend you that much doesn't mean you should borrow it — at 43% DTI in a high-cost city, you have almost no margin for a single car repair, let alone childcare costs or a medical bill.

Inputs lenders don't see

Pre-approval considers income and debts. It does not consider: childcare, college savings, healthcare premiums you pay out of pocket, lifestyle preferences. Two families earning the same can have wildly different sustainable housing budgets. Build your budget around net income after all real expenses, not gross.

The 'house-rich, cash-poor' trap

Buying at the top of pre-approval means: minimum down payment (often with PMI), little savings buffer, and a payment that consumes most of your discretionary income. The first major repair (roof, HVAC, water heater) can put you in real financial stress. A budget at 75-80% of max pre-approval gives you breathing room.

Common Mistakes

• Targeting the maximum pre-approval as your budget instead of your ceiling.
• Forgetting closing costs (2-4% of price) and the moving/furniture budget for a new home (often $10,000-20,000).
• Assuming current rent equals affordable mortgage. Mortgage = rent + maintenance + property tax + insurance + opportunity cost on down payment.
• Buying for the family you'll have in 5 years, not the family you have now. Life plans change.

Frequently Asked Questions

What credit score do I need to buy a home?
Conventional loans typically want 620+, FHA accepts 580+ (sometimes 500 with 10% down). Best rates start at 740. Below 620 your options narrow sharply.

How much should I save for a down payment?
20% to avoid PMI and get the best rates. 10-15% is common for first-time buyers. 3-3.5% is the minimum for conventional and FHA loans respectively.

This calculator is for informational purposes only and does not constitute financial, tax, or legal advice. Consult a licensed professional before making significant financial decisions.