Finance

Loan Affordability Calculator

Determine Your Borrowing Power

Estimate how much you can safely borrow for a mortgage, auto loan, or personal loan based on your income, existing debts, and desired monthly payment. Understand your affordability limits before applying for financing.

Quick Tips

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Try an Example

Pick a scenario to see how the calculator works, then adjust the values

Starter Home

Calculate monthly payments on a $250K home with 20% down

Key values: Price: $250,000 · Rate: 4.5% · Term: 30 years

Dream Home

Plan payments for a $500K property with a competitive rate

Key values: Price: $500,000 · Rate: 3.5% · Term: 30 years

Affordability Check

Find out how much house you can afford on $6,000/month income

Key values: Income: $6,000/mo · Debt: $500/mo · Rate: 4.5%

Documentation

This calculator is also known as Loan Affordability Calculator.

Read the complete guide

Factors Affecting Loan Affordability

Lenders primarily look at your income, existing debt payments (like credit cards, student loans), the proposed loan's interest rate and term, and your down payment to determine how much you can afford.

Examples

Example: Can I Afford This Car?

Assessing affordability for a $25,000 car loan over 5 years at 6% interest

Based on typical debt-to-income ratios (e.g., 40% max), this calculator helps determine if the monthly payment for this loan fits within your budget.

Key takeaway: Knowing your affordability prevents overextending your finances.

Improve Your Borrowing Potential

If the calculator shows you can borrow less than needed, consider these steps:

Reduce existing debt balances (credit cards, other loans)
Increase your income if possible
Save for a larger down payment
Look for loans with lower interest rates or longer terms (be mindful of total interest cost)

Frequently Asked Questions about Loan Affordability Calculator

What is a good debt-to-income ratio?

Lenders generally prefer a debt-to-income (DTI) ratio below 43%, including your potential new loan payment. A lower DTI (under 36%) is often better for loan approval and favorable terms.

How does the 28/36 rule work for housing affordability?

The 28/36 rule says your monthly housing payment (principal, interest, taxes, insurance) should not exceed 28% of your gross monthly income, and your total debt payments (housing plus car, student loans, credit cards) should not exceed 36%. Lenders use these thresholds as a quick filter — staying within both limits generally makes approval easier and leaves room for other expenses.

Does paying off existing debt before applying improve my affordability?

Yes, significantly. Every dollar of monthly debt you eliminate lowers your DTI, which directly increases the maximum mortgage payment a lender will approve. Paying off a $200/month car loan, for example, can raise your maximum affordable home price by $30,000–$40,000 at current rates. Focus on high-minimum debts (credit cards, personal loans) rather than installment loans with small remaining balances.