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Mortgage Affordability Calculator
Estimate how much house you can realistically afford based on your income, debts, and desired monthly payment.
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Mortgage Affordability Calculator | How Much House Can You Afford?
Estimate how much house you can realistically afford based on your income, debts, and desired monthly payment.
Key values: $75,000 income · $400/month debts · 7.0% rate · 10% down
Dual Income — $130,000 Household
A two-income household with car payments and 20% saved for a down payment.
Key values: $130,000 income · $800/month debts · 6.75% rate · 20% down
The 28/36 Rule
Lenders use two debt-to-income (DTI) ratio thresholds to determine how much you can borrow:
Front-end: 28%
Housing costs (mortgage + taxes + insurance) should not exceed 28% of gross monthly income.
Back-end: 36%
All monthly debt (housing + car + student loans + credit cards) should not exceed 36% of gross monthly income.
Calculating Your Maximum Home Price
- Compute max monthly housing payment from the 28% rule.
- Subtract estimated monthly property tax and insurance.
- The remainder is your available mortgage payment .
- Reverse the amortization formula to find the maximum loan:
Add your down payment to get the maximum purchase price:
Worked Example
Annual income: $90,000. Existing debt: $400/month. Down payment: $60,000. Rate: 6.5%, 30-year term. Property tax + insurance: $400/month.
- Gross monthly income:
- Front-end limit:
- Back-end limit:
- Binding constraint: front-end ($2,100). Subtract tax/insurance: $2,100 − $400 = $1,700 available for mortgage.
- Max loan ≈ $267,000 → Max purchase ≈ $327,000.
Down Payment Impact
| Down payment | Effect |
|---|---|
| < 20% | Requires PMI (~$100–300/month), reducing buying power |
| 20% | No PMI required — the traditional target |
| > 20% | Lower monthly payments, better rates, stronger offer |
First-time buyer note: FHA loans allow as little as 3.5% down, and conventional loans can go as low as 3%. The trade-off is higher monthly costs (PMI + larger loan amount) and potentially higher rates.
Frequently Asked Questions
What is the 28/36 rule for home affordability?
The 28/36 rule sets two limits: housing costs (mortgage, taxes, insurance) should not exceed 28% of gross monthly income (front-end ratio), and all monthly debt payments combined should not exceed 36% of gross monthly income (back-end ratio).
How do I calculate the maximum home price I can afford?
Apply the 28% front-end ratio to your gross monthly income, subtract estimated property taxes and insurance, then reverse the amortization formula to find the maximum loan amount. Add your down payment to get the maximum purchase price.
How does down payment size affect affordability?
A larger down payment increases your buying power. Below 20%, PMI adds $100-300/month to costs. At 20%, you avoid PMI entirely. Above 20%, you get lower monthly payments, better interest rates, and a stronger purchase offer.
What is the minimum down payment for a first-time buyer?
FHA loans allow as little as 3.5% down, and conventional loans can go as low as 3%. The trade-off is higher monthly costs from PMI plus a larger loan amount, and potentially higher interest rates compared to a 20% down payment.
Does existing debt reduce how much house I can afford?
Yes. The back-end ratio (36%) includes all monthly debt: car payments, student loans, credit cards, and housing. Each dollar of existing monthly debt directly reduces the amount available for your mortgage payment, lowering your maximum purchase price.
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