Estimate the maximum home price you can afford based on income, debts, down payment, and loan terms.
Financial Profile
Input your income, debts, and savings to determine your purchasing power.
Understanding the Ratios
The rigorous math lenders use to qualify you
Front-End Ratio (28%)
The percentage of your annual gross income that goes toward housing costs (Mortgage + Tax + Insurance). Lenders prefer this to be under 28%.
Back-End Ratio (36%)
The percentage of your gross income that goes toward ALL debts (Housing + Loans + Credit Cards). This is usually the harder limit to satisfy (Typically max 36% - 43%).
Max Price * (MortgageFactor + TaxRate) = Max Payment - Ins - HOA + (DownPayment * MortgageFactor)
The calculator works backwards from your monthly income limits to find the maximum monthly payment you can support. It then deducts fixed costs like taxes, insurance, and HOA to see how much is left for pure mortgage Principal & Interest. Finally, it converts that P&I ability into a loan amount using the interest rate and term, and adds your down payment.
Lenders don\'t guess how much you can borrow; they use a strict formula. The most common is the 28/36 Rule, which serves as a ceiling for responsible lending.
1. The Front-End Ratio (28%)
No more than 28% of your gross monthly income should go toward Housing Expenses. This includes:
Mortgage Principal & Interest
Property Taxes
Homeowners Insurance
HOA Fees
2. The Back-End Ratio (36%)
No more than 36% of your gross monthly income should go toward Total Debt. This includes Housing Expenses PLUS:
Car Loans
Student Loans
Credit Card Minimum Payments
Personal Loans
Note: Some loan programs (like FHA loans) allow higher ratios (up to 43% or even 50%), but borrowing the maximum amount puts you at higher risk of "house poverty."
Debt-to-Income (DTI) Explained
Your DTI is the single most important number in mortgage qualification. If you have high student loans or a large car payment, your borrowing power is directly reduced dollar-for-dollar.
For example, a $500/month car payment reduces your affordable mortgage amount by roughly $75,000 to $100,000 (depending on interest rates). Elimination of debt is often the fastest way to increase your home budget.
Don\'t Forget the "Hidden" Costs
Many first-time buyers only look at the "Mortgage Payment" (Principal & Interest). This is a trap. The "PITI" payment (Principal, Interest, Taxes, Insurance) is what you actually pay.
Why Taxes Matter
In high-tax states (like NJ, IL, TX), property taxes can easily be $800-$1,000 per month on an average home. This alone effectively reduces your buying power by $150,000+ compared to low-tax states.
Strategies to Afford More
Pay Down Debt: Eliminating a $300 monthly payment boosts your buying power significantly more than saving $300 more for a down payment.
Boost Your Credit Score: A higher score gets you a lower interest rate. A 1% drop in rate boosts buying power by ~10%.
Consider 2-4 Unit Properties: You can often count 75% of the projected rental income from the other units as "income," boosting your DTI capacity.
Frequently Asked Questions
Common questions about qualifying for a mortgage
Can I afford a house 3x my income?
The "3x Rule" is outdated. With today's interest rates (6-7%), limits are often closer to 3x-4x depending on your debts. In calculation, lender DTI limits matters more than arbitrary multiples.
What if I have bad credit?
You may still qualify for FHA loans (min 580 score for 3.5% down). However, your interest rate will be higher, reducing the total amount you can borrow.
Is the affordability estimate a pre-approval?
No. This is a mathematical estimate. A pre-approval requires a hard credit check and verification of income documents (W2s, Paystubs) by a licensed loan officer.
Does a larger down payment help?
Yes. It helps in two ways: 1) It lowers the loan amount needed, and 2) If >20%, it removes PMI, lowering the monthly payment and freeing up DTI space for more principal.
Should I spend the maximum amount I qualify for?
Rarely. The bank determines the max you can pay back, not the max you can live comfortably with. Leave room for emergency repairs, furniture, and vacations.
Why is HOA included in DTI?
HOA fees are a mandatory monthly obligation linked to the property. If you don't pay them, the HOA can foreclose. Thus, lenders treat them as a fixed housing debt.
Usage of this Calculator
Applications and Limitations
Who Should Use This?
Active House HuntersFilter your Zillow/Redfin searches to a realistic max price to avoid disappointment.
Debt OptimizersSee exactly how much "house buying power" you gain by paying off that $400/mo car loan.
Limitations
PMI Estimates: We don\'t explicitly calculate varied PMI rates, which depend on credit score. We assume standard costs.
Closing Costs: The Max Price is the sticker price. You will need extra cash (2-5%) for closing costs.
Summary
This calculator uses the industry-standard "Backwards" calculation method: starting from your income caps (28%/36%), deducting your existing obligations, and solving for the maximum loan amount your budget supports.
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Estimate the maximum home price you can afford based on income, debts, down payment, and loan terms.
How to use Home Affordability Calculator
Step-by-step guide to using the Home Affordability Calculator:
Enter your values. Input the required values in the calculator form
Calculate. The calculator will automatically compute and display your results
Review results. Review the calculated results and any additional information provided
Frequently asked questions
How do I use the Home Affordability Calculator?
Simply enter your values in the input fields and the calculator will automatically compute the results. The Home Affordability Calculator is designed to be user-friendly and provide instant calculations.
Is the Home Affordability Calculator free to use?
Yes, the Home Affordability Calculator is completely free to use. No registration or payment is required.
Can I use this calculator on mobile devices?
Yes, the Home Affordability Calculator is fully responsive and works perfectly on mobile phones, tablets, and desktop computers.
Are the results from Home Affordability Calculator accurate?
Yes, our calculators use standard formulas and are regularly tested for accuracy. However, results should be used for informational purposes and not as a substitute for professional advice.