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Mortgage Affordability Calculator

Determine how much house you can realistically afford by analyzing your income, current debts, and down payment savings based on standard lender guidelines.

Your total income before taxes.
Car loans, student loans, minimum credit card payments, etc.

Understanding Mortgage Affordability and DTI

Before starting your home search, it is crucial to understand how lenders determine how much they are willing to lend you. The primary metric used is the **Debt-to-Income (DTI) ratio**. Lenders use two types of DTI ratios:

  • Front-End Ratio: The percentage of your gross monthly income that goes toward housing costs (mortgage principal, interest, property taxes, and insurance). Most conventional lenders prefer this to be 28% or lower.
  • Back-End Ratio: The percentage of your gross monthly income that goes toward housing costs plus all other recurring monthly debts (credit cards, auto loans, student loans). Lenders generally prefer this to be 36% or lower.

This calculator determines the maximum monthly payment you can afford based on the stricter of these two limits and reverse-calculates the home price based on your down payment and current interest rates.

Key Factors Impacting Your Purchase Power

Several variables significantly affect the final price of the home you can afford:

  • Monthly Debts: High existing monthly obligations directly reduce the amount of income available for a mortgage payment. Paying down car loans or credit cards can significantly boost your affordability.
  • Interest Rate: Even a small increase in interest rates can drastically increase your monthly payment, reducing the total loan amount you qualify for.
  • Down Payment: A larger down payment not only reduces the loan amount needed but can also eliminate the need for Private Mortgage Insurance (PMI), freeing up more monthly budget for the mortgage principal.

Realistic Affordability Example

Let's look at a typical scenario to see how these numbers interact:

  • Annual Income: $95,000 (approx. $7,916/month gross)
  • Monthly Debts: $600 (car payment and student loan)
  • Down Payment: $50,000
  • Interest Rate: 7.0% on a 30-year fixed term

Using the 28%/36% rule, the lender calculates:

  1. Max housing based on income (28%): $2,216/mo.
  2. Max total debt allowed (36%): $2,850/mo.
  3. Max housing allowed after debts ($2,850 - $600): $2,250/mo.

The lender uses the lower constraint ($2,216/mo) for total housing costs (PITI). After setting aside an estimated 25% for taxes and insurance, roughly $1,662 remains for principal and interest. Based on a 7.0% rate, this supports a loan of approximately $250,000. Adding the $50,000 down payment, the maximum affordable home price is roughly $300,000.

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