Home Affordability Calculator

Use this Home Affordability Calculator to estimate how much house you can afford based on your income, existing debts, down payment, and current mortgage rates. Get a complete breakdown of monthly payments including principal, interest, property taxes, insurance, PMI, and HOA fees, plus visual charts to help you understand your home buying budget.

How the Calculator Works

This calculator uses the industry-standard 28/36 rule to determine your maximum affordable home price:

• Front-end ratio (28%): Your total housing costs (mortgage payment, property taxes, insurance, HOA, PMI) should not exceed 28% of your gross monthly income.
• Back-end ratio (36%): Your total monthly debts (housing costs plus car payments, student loans, credit cards, etc.) should not exceed 36% of your gross monthly income.

The calculator uses the more conservative of these two limits to ensure you get a realistic, sustainable home price estimate.

Understanding Your Results

Maximum Home Price

This is the highest home price you can comfortably afford while staying within recommended debt-to-income guidelines. It combines your maximum loan amount plus your down payment.

Monthly Payment Breakdown

Your monthly housing payment (often called PITI or PITIA) includes:

• Principal & Interest (P&I): The actual mortgage payment that goes toward paying off your loan and interest charges.
• Property Taxes: Annual property taxes divided by 12. The default rate is 1.1%, but varies significantly by location.
• Homeowners Insurance: Required coverage protecting your home. Default estimate is 0.35% of home value annually.
• PMI (Private Mortgage Insurance): Required if your down payment is less than 20%. Typically 0.3% to 1.5% of loan amount annually.
• HOA Fees: Monthly fees if your property is in a homeowners association.

Debt-to-Income (DTI) Ratios

The DTI gauge shows where your ratios fall compared to lending guidelines:

Tips for Home Buyers

The 20% Down Payment Myth

While 20% down is ideal to avoid PMI, it is not required. Many buyers successfully purchase homes with 3-10% down. Consider:

• FHA loans: As low as 3.5% down with credit score of 580+
• Conventional loans: Some allow 3-5% down for first-time buyers
• VA loans: 0% down for eligible veterans
• USDA loans: 0% down in eligible rural areas

What This Calculator Does Not Include

This is an estimate based on general guidelines. It does not account for:

• Your credit score (which affects your actual rate and approval)
• Local housing market conditions
• Other assets or savings you may have
• Future income changes
• Closing costs (typically 2-5% of home price)
• Moving and furnishing costs
• Home maintenance reserve (budget 1-2% of home value annually)

Frequently Asked Questions

How much house can I afford on my salary?

A common guideline is that you can afford a home priced at 2.5 to 3 times your annual gross income. However, lenders use debt-to-income (DTI) ratios: the 28/36 rule suggests your housing costs should not exceed 28% of gross monthly income, and total debts should not exceed 36%. Use our calculator to get a personalized estimate based on your specific financial situation.

What is the 28/36 rule for mortgages?

The 28/36 rule is a lending guideline where: (1) Your front-end ratio (housing costs including mortgage, taxes, insurance) should not exceed 28% of your gross monthly income, and (2) Your back-end ratio (total monthly debts including housing) should not exceed 36% of your gross monthly income. Some lenders allow higher ratios for borrowers with excellent credit.

How much down payment do I need for a house?

Traditional mortgages often require 20% down to avoid Private Mortgage Insurance (PMI). However, many loan programs accept less: FHA loans require as little as 3.5% down, and some conventional loans accept 3-5% down. A larger down payment reduces your loan amount, monthly payments, and may get you a better interest rate.

What is PMI and when is it required?

Private Mortgage Insurance (PMI) is required when your down payment is less than 20% of the home price (loan-to-value ratio above 80%). PMI typically costs 0.3% to 1.5% of the original loan amount per year. Once you reach 20% equity, you can request PMI removal; it automatically cancels at 22% equity.

Should I get a 15-year or 30-year mortgage?

A 30-year mortgage has lower monthly payments, providing more budget flexibility. A 15-year mortgage has higher payments but significantly less total interest (often 50%+ savings). Choose 15 years if you can comfortably afford the higher payment; choose 30 years for lower payments with the option to pay extra when possible.

How do interest rates affect home affordability?

Interest rates significantly impact affordability. A 1% increase in rate can reduce your buying power by about 10%. Lower rates mean you can afford a higher-priced home with the same monthly payment.

Additional Resources

• CFPB - Owning a Home
• HUD - Buying a Home