Home Affordability Calculator

Find out how much home you can afford based on your income, debts, and down payment savings. Uses the industry-standard 28/36 DTI rule.

Your Financial Details

$
$

Car loans, student loans, credit cards, etc.

$
%
%
%
%

Standard is 36%. FHA allows up to 43%.

Ready to Calculate

Enter your financial details and click Calculate to see how much home you can afford.

Related Calculators

Pro Tip

Most lenders use the lower of the front-end (28%) and back-end (36%) DTI calculations. Reducing existing debts before applying can significantly increase your buying power.

Try Debt Payoff Calculator →

Popular Tools

Understanding Home Affordability

Determining how much home you can afford is the essential first step in the home buying process. This calculator uses the same debt-to-income (DTI) methodology that mortgage lenders employ to evaluate borrowers, giving you a realistic picture of your purchasing power before you start shopping.

The calculation considers your gross annual income, existing monthly debt obligations, available down payment, current mortgage interest rates, and the ongoing costs of property taxes and homeowners insurance. By factoring in all of these variables, you get a comprehensive estimate rather than a simplistic rule of thumb.

Lenders typically evaluate two DTI ratios: the front-end ratio (housing costs as a percentage of gross income) and the back-end ratio (all monthly debt payments including housing as a percentage of gross income). The standard thresholds are 28% for front-end and 36% for back-end, though some loan programs allow higher ratios.

Keep in mind that being approved for a certain amount does not mean you should borrow that much. A comfortable mortgage payment leaves room for savings, retirement contributions, emergency funds, and lifestyle expenses. Many financial planners recommend keeping total housing costs closer to 25% of take-home pay.

Maximum Home Price Formula

Max Loan = (Max Monthly Payment - Down Payment × Tmonthly) / (PMT Factor + Tmonthly)

Where:

Max Monthly Payment = Min(28% of gross monthly income, 36% of gross monthly income - existing debts)

PMT Factor = r(1+r)^n / ((1+r)^n - 1), where r = monthly rate, n = total months

T_monthly = (Property Tax Rate + Insurance Rate) / 12

Max Home Price = Max Loan + Down Payment Savings

Example

For $96,000/year income, $500/month debts, $60,000 down, 6.75% rate, 30-year term:

  • • Monthly income: $8,000
  • • Front-end max (28%): $2,240/month for housing
  • • Back-end max (36%): $2,880 - $500 debts = $2,380
  • • Use lower: $2,240 max housing payment
  • • Solve for max loan given taxes and insurance

Frequently Asked Questions

How is the maximum home price calculated?
The calculator works backwards from your income using the 28/36 DTI rule. It determines the maximum monthly housing payment you can afford (28% of gross income for housing, 36% for all debts combined), then uses the mortgage payment formula to find the maximum loan amount that fits within that budget.
What is the 28/36 rule?
The 28/36 rule is a guideline used by lenders. It states that your total housing costs (principal, interest, taxes, insurance) should not exceed 28% of your gross monthly income (front-end ratio), and your total debt payments including housing should not exceed 36% of gross monthly income (back-end ratio).
Does this include all costs of homeownership?
This calculator includes principal and interest, property taxes, and homeowners insurance. It does not include HOA fees, maintenance costs (typically 1-2% of home value annually), utilities, or PMI. Your actual budget should account for these additional expenses.
Can I afford more with an FHA or VA loan?
FHA loans allow a higher DTI ratio (up to 43-50% in some cases), which could increase your buying power. VA loans have no PMI and may allow higher DTI ratios. Use our FHA and VA calculators for those specific scenarios.
Should I spend the maximum I can afford?
Financial advisors often recommend spending less than your maximum to maintain a comfortable financial cushion. Consider future expenses, job stability, retirement savings, and lifestyle when deciding how much house to buy.