Mortgage Affordability Calculator

Calculate How Much House You Can Afford

Enter your income, monthly debts, down payment amount, interest rate, and loan term to see the maximum home price you can afford and your monthly payment breakdown.

Monthly Payment Breakdown

How the Calculation Works

This calculator uses the 28/36 rule, a standard guideline that most lenders follow:

• 28% Front-End Ratio: Your monthly housing costs (principal, interest, taxes, insurance) should not exceed 28% of your gross monthly income.
• 36% Back-End Ratio: Your total monthly debt payments (housing plus other debts) should not exceed 36% of your gross monthly income.

Calculation Steps

1. Calculate monthly income: Annual income ÷ 12
2. Calculate maximum housing payment (28% rule): Monthly income × 0.28
3. Calculate maximum total debt (36% rule): Monthly income × 0.36
4. Check both limits: The calculator uses the more restrictive of the two ratios to ensure you qualify under both rules.
5. Subtract non-mortgage costs: Property taxes, insurance, HOA fees, and PMI (if applicable) are deducted from the maximum housing payment.
6. Calculate affordable loan amount: Using the remaining amount for principal and interest, calculate the maximum loan you can afford at the given interest rate and term.
7. Add down payment: Loan amount + down payment = maximum home price

The PITI Payment

A complete mortgage payment includes four components, known as PITI:

• Principal: The portion that pays down your loan balance
• Interest: The cost of borrowing money
• Taxes: Property taxes, typically paid monthly into an escrow account
• Insurance: Homeowners insurance and PMI (if down payment is less than 20%)

Understanding Debt-to-Income Ratios

Front-End DTI (Housing Ratio)

The front-end DTI includes only your housing-related expenses: mortgage principal and interest, property taxes, homeowners insurance, HOA fees, and PMI. Lenders typically require this to be 28% or less of your gross monthly income.

Formula: (Monthly housing costs ÷ Gross monthly income) × 100

Back-End DTI (Total Debt Ratio)

The back-end DTI includes all your monthly debt obligations: housing costs plus car loans, student loans, credit card minimum payments, personal loans, and any other recurring debt. Lenders typically require this to be 36% or less, though some programs allow up to 43% or higher with strong credit.

Formula: (Total monthly debt payments ÷ Gross monthly income) × 100

What Counts as Debt?

Include all recurring monthly obligations:

• Auto loan payments
• Student loan payments
• Credit card minimum payments
• Personal loan payments
• Child support or alimony
• Other mortgage or rent payments (e.g., rental properties)

Do not include utilities, groceries, or other living expenses that are not fixed debt obligations.

Down Payment and PMI

How Much Down Payment Do You Need?

• Conventional loans: Minimum 3-5%, but 20% avoids PMI
• FHA loans: Minimum 3.5%
• VA loans: 0% down for eligible veterans
• USDA loans: 0% down for eligible rural properties

What is PMI?

Private Mortgage Insurance (PMI) is required when your down payment is less than 20% of the home price. It protects the lender if you default on the loan. PMI typically costs 0.5% to 1.5% of the loan amount per year, divided into monthly payments.

Example: On a $300,000 loan, PMI might cost $1,500 to $4,500 per year ($125 to $375 per month).

PMI can be removed once you reach 20% equity in your home, either through paying down the loan or through home appreciation.

Example Scenarios

Factors That Affect Affordability

Interest Rates

Even small changes in interest rates have a big impact on affordability. A 1% increase in rates can reduce your buying power by 10-15%. For example, at 6% interest, you might afford a $400,000 home, but at 7%, you might only afford $360,000 with the same monthly payment.

Loan Term

A 30-year mortgage has lower monthly payments than a 15-year mortgage, allowing you to afford a more expensive home. However, you will pay significantly more interest over the life of the loan. A 15-year loan builds equity faster and saves on total interest but requires higher monthly payments.

Property Taxes

Property tax rates vary widely by location, from under 0.5% in some states to over 2% in others. Higher property taxes reduce the amount you can afford to borrow because they increase your monthly housing costs.

Credit Score

Your credit score affects the interest rate you qualify for. Borrowers with excellent credit (740+) get the best rates, while those with lower scores pay higher rates, reducing affordability. Improving your credit before applying for a mortgage can save thousands over the life of the loan.

Frequently Asked Questions

How much house can I afford?

Most lenders use the 28/36 rule: your housing costs should not exceed 28% of your gross monthly income, and your total debt payments (including housing) should not exceed 36%. This calculator applies both rules and shows you the maximum home price based on your specific financial situation.

What is the debt-to-income ratio (DTI)?

DTI is the percentage of your gross monthly income that goes toward debt payments. The front-end DTI includes only housing costs (mortgage, taxes, insurance). The back-end DTI includes all debt (housing plus car loans, credit cards, student loans, etc.). Lenders typically require a back-end DTI below 36-43%.

What is included in the monthly mortgage payment?

A full mortgage payment (PITI) includes four components: Principal (loan amount repayment), Interest (cost of borrowing), Property Taxes (annual taxes divided monthly), and Insurance (homeowners insurance and PMI if down payment is less than 20%).

How much down payment do I need?

Conventional loans typically require 3-20% down. FHA loans require 3.5% minimum. VA and USDA loans may require 0% down for eligible borrowers. A 20% down payment avoids private mortgage insurance (PMI), which reduces your monthly payment and increases affordability.

What is PMI and when is it required?

PMI (Private Mortgage Insurance) is required when your down payment is less than 20% of the home price. It protects the lender if you default. PMI typically costs 0.5-1.5% of the loan amount annually, added to your monthly payment. It can be removed once you reach 20% equity through payments or appreciation.

What is the 28/36 rule?

The 28/36 rule is a lending guideline: your housing costs (PITI) should not exceed 28% of gross monthly income (front-end ratio), and total debt payments should not exceed 36% of gross monthly income (back-end ratio). Some lenders allow higher ratios (up to 43-50%) with excellent credit and reserves.

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

A 30-year mortgage offers lower monthly payments and greater flexibility, making it easier to afford a home. A 15-year mortgage has higher monthly payments but builds equity faster and saves significantly on total interest. Choose based on your budget, goals, and financial stability.

How do interest rates affect affordability?

Lower interest rates increase affordability by reducing your monthly payment for the same loan amount. For example, at 6% interest on a $300,000 loan, the payment is $1,799/month. At 7%, it is $1,996/month—an extra $197/month or $70,920 over 30 years.

Does this calculator store my data?

No. All calculations run entirely in your browser. No financial data is sent to any server, and nothing is stored. Your information remains completely private.

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Mortgage Affordability Calculator FAQ