House Affordability Calculator — How Much Home Can You Afford?

How to Use the House Affordability Calculator

Our house affordability calculator uses the same 28/36 debt-to-income guidelines that most mortgage lenders use to determine your borrowing capacity. This gives you a realistic picture of how much home you can afford before you start shopping or apply for a mortgage.

1. Enter your annual gross income. Input your total household income before taxes. Include all regular income sources: salaries, wages, bonuses (if consistent), self-employment income, rental income, and other verifiable earnings. If buying with a partner, combine both incomes. Lenders verify income through pay stubs, tax returns, and W-2 forms.
2. Add your monthly debt payments. Enter the total of all monthly debt obligations: car payments, student loan payments, minimum credit card payments, personal loans, child support, and any other recurring debt. Do not include utilities, groceries, or insurance. Lower debt means you can afford more home because it improves your back-end DTI ratio.
3. Set your down payment percentage. Enter the percentage of the home price you plan to put down. A 20% down payment is ideal because it eliminates PMI, but many buyers start with 3-10%. The calculator adjusts your maximum home price based on how much of the purchase you are financing versus paying upfront.
4. Input the expected interest rate. Enter the mortgage rate you expect to receive. Check current average rates or use a pre-approval rate from a lender. Even small rate differences (0.25-0.5%) can shift your affordable home price by $10,000 or more.
5. Choose your loan term. Select 15, 20, or 30 years. A 30-year term gives you the highest affordable price because payments are spread over more time. A 15-year term reduces your affordable price but saves significantly on total interest.
6. Review your results. The calculator displays your maximum home price, loan amount, down payment amount, monthly payment breakdown (principal and interest, property tax, insurance), and your front-end and back-end DTI ratios with visual progress bars showing whether you are within guidelines.

Adjust the property tax rate and insurance rate to match your area for the most accurate results. Property tax rates vary significantly by state and county, from 0.3% to over 2%.

Understanding the Affordability Formula

The house affordability calculation is based on the 28/36 debt-to-income (DTI) rule, a standard guideline used by most conventional mortgage lenders to ensure borrowers can comfortably manage their payments.

The calculator finds the maximum home price by:

• Step 1: Calculate max housing payment from front-end ratio: Gross Monthly Income × 0.28
• Step 2: Calculate max housing payment from back-end ratio: (Gross Monthly Income × 0.36) − Monthly Debts
• Step 3: Use the lower of the two amounts as your maximum total housing payment
• Step 4: Subtract monthly property tax and insurance to find max principal and interest payment
• Step 5: Reverse the mortgage formula to find the loan amount that produces this P&I payment
• Step 6: Add the down payment to the loan amount to get your maximum home price

Worked Example

Annual income: $96,000 ($8,000/month). Monthly debts: $600. Down payment: 20%. Rate: 6.5%, 30 years. Tax rate: 1.1%, Insurance: 0.35%.

1. Front-end max: $8,000 × 0.28 = $2,240/month for housing
2. Back-end max: $8,000 × 0.36 − $600 = $2,280/month for housing
3. Binding constraint: $2,240 (front-end is lower, so it limits affordability)
4. Monthly tax + insurance rate: (1.1% + 0.35%) / 12 = 0.1208% of home price per month
5. Max P&I payment: $2,240 minus tax/insurance (solved iteratively) ≈ $1,746
6. Max loan from P&I payment: Approximately $276,000
7. Max home price: $276,000 / (1 − 0.20) = $345,000

Practical Affordability Examples

These scenarios demonstrate how different income levels, debt loads, and down payments affect your home buying power in realistic 2026 market conditions.

First-Time Buyer on a Moderate Income

Taylor earns $55,000 per year ($4,583/month gross) and has $300/month in student loan payments. With a 10% down payment, 6.5% rate for 30 years, and average property tax and insurance, her maximum affordable home price is approximately $195,000. Her maximum monthly housing payment is $1,283 (28% front-end). After subtracting estimated taxes and insurance, her P&I budget is about $1,050, supporting a loan of approximately $166,000. With 10% down, she needs $19,500 cash for the down payment plus 3-5% for closing costs ($5,850 to $9,750).

Dual-Income Household

Marcus ($72,000) and Priya ($68,000) have a combined income of $140,000 ($11,667/month). Their combined monthly debts are $850 (car loan and credit cards). With 20% down, 6.5% for 30 years, the front-end limit is $3,267/month and the back-end limit is $3,350/month. The front-end ratio is binding, giving them a maximum home price of approximately $530,000. Their down payment would be $106,000, and they would finance $424,000. This demonstrates how dual incomes with moderate debt significantly expand buying power compared to a single income.

High Debt Impact Analysis

Brandon earns $90,000/year ($7,500/month) but carries $1,500/month in debts (car: $450, student loans: $650, credit cards: $400). Despite good income, his back-end limit of $7,500 × 0.36 − $1,500 = $1,200 is far below his front-end limit of $2,100. His maximum affordable home is only about $195,000 because existing debts consume a large share of his allowable debt ratio. If Brandon paid off his credit cards ($400/month), his affordability would jump to approximately $260,000, a $65,000 increase. This illustrates why reducing existing debts before buying is so valuable.

High-Cost Market with 15-Year Term

Dr. Chen earns $180,000/year ($15,000/month) with $800 in monthly debts. In a high-cost market, she opts for a 15-year mortgage at 5.75% with 25% down. Her front-end limit is $4,200/month. Despite the shorter term requiring higher payments, her high income supports a maximum home price of approximately $540,000. She would put down $135,000 and finance $405,000 with a monthly payment of about $3,390 (P&I). While her maximum is slightly lower than a 30-year term would allow, she will pay her home off in 15 years and save over $200,000 in interest.

Home Affordability Tips and Buying Guide

Knowing your maximum affordable home price is just the starting point. These strategies help you make the most of your buying power and avoid overextending your finances.

Budget Below Your Maximum

The 28/36 rule determines the maximum a lender will allow, not what is comfortable for your lifestyle. Financial planners recommend targeting a home price that keeps your total housing cost (mortgage, taxes, insurance, maintenance, utilities) below 30% of your take-home pay. This leaves room for retirement savings, emergency funds, children expenses, and enjoying life. If your maximum affordable price is $350,000, targeting homes in the $280,000 to $320,000 range gives you valuable financial breathing room.

Improve Your Affordability Before Buying

Several strategies can increase your affordable home price. Paying down existing debt reduces your back-end ratio: eliminating a $400/month car payment could increase your buying power by $60,000 or more. Improving your credit score qualifies you for lower interest rates, and even a 0.5% rate reduction can increase affordability by $20,000 to $30,000. Saving a larger down payment reduces the loan amount needed and may eliminate PMI. Increasing your income through a raise, promotion, or side income directly expands your affordability under both DTI ratios.

Account for Hidden Homeownership Costs

Beyond the mortgage payment, homeownership includes costs that are not factored into the 28/36 rule. Budget for maintenance and repairs (1-2% of home value per year, or $3,500 to $7,000 on a $350,000 home), utilities ($150 to $400 per month depending on home size and climate), HOA fees if applicable ($100 to $500 per month), home furnishing and initial setup costs, and eventual major replacements like roof, HVAC, and appliances ($5,000 to $15,000 each). Having cash reserves after closing is critical: aim for at least 3 to 6 months of total expenses in savings.

Consider Location Trade-Offs

Where you buy dramatically affects affordability. Property taxes alone can swing your monthly payment by hundreds of dollars. A $350,000 home in a state with 0.5% tax rate costs $146/month in property tax, while the same home in a 2.0% tax state costs $583/month. This $437 difference means the high-tax location effectively reduces the home price you can afford by approximately $60,000. Similarly, different neighborhoods within the same city can have significantly different insurance costs, commute expenses, and utility costs.

Common Mistakes to Avoid

• Using net income instead of gross. The 28/36 rule uses gross (pre-tax) income, not your take-home pay. Using net income will significantly underestimate your affordability. However, budgeting your actual cash flow should use take-home pay.
• Forgetting about closing costs. In addition to your down payment, plan for 2-5% of the loan amount in closing costs ($5,600 to $14,000 on a $280,000 mortgage). This cash is needed at closing and is separate from your down payment savings.
• Ignoring future life changes. Buying at your maximum assumes your income and expenses stay the same. Consider whether you plan to have children, change careers, go back to school, or have one partner stop working. Buying below your maximum provides a safety net for life changes.
• Not getting pre-approved first. A calculator gives you an estimate, but only a lender pre-approval confirms what you can actually borrow. Pre-approval considers factors the calculator cannot, including credit history depth, employment stability, and asset verification. Get pre-approved before making offers.
• Stretching for a "dream home" beyond your budget. The difference between a comfortable mortgage and a stressful one is often just 10-15% of home price. Buying a home you love at 90% of your maximum is far better than buying one at 105% that creates financial strain for decades.