Mortgage Affordability Calculator
Determine how much house you can realistically afford to buy based on your income, existing debts, down payment savings, and current interest rates. This calculator uses standard lender debt-to-income (DTI) ratios to estimate your maximum purchasing power.
Understanding Mortgage Affordability and DTI
When lenders decide how much they are willing to lend you for a home purchase, they primarily look at your Debt-to-Income (DTI) ratio. This ratio compares your gross monthly income to your monthly debt obligations. There are generally two thresholds lenders use:
- Front-End Ratio (Housing Ratio): This is the percentage of your gross monthly income that goes towards housing costs, including principal, interest, property taxes, and insurance (often abbreviated as PITI). A standard conventional guideline is that this shouldn't exceed 28%.
- Back-End Ratio (Total Debt Ratio): This includes your new housing costs plus all other recurring monthly debts, such as car payments, student loans, and minimum credit card payments. Most conventional lenders prefer this ratio to be under 36%, though some loan programs allow for higher ratios.
The lower of these two calculations usually determines your maximum monthly housing budget. This calculator uses these standard 28%/36% ratios to estimate the maximum home price you can afford given your down payment and current interest rates. Keep in mind that higher interest rates significantly reduce buying power because more of your monthly payment goes toward interest rather than the loan principal.