House Affordability Calculator
Determine the maximum home price you can afford based on your annual income, existing debts, down payment, and interest rate. This calculator uses the standard 28/36 debt-to-income rule used by most lenders.
The 28/36 Debt-to-Income Rule
Lenders use the 28/36 rule to determine how much you can borrow:
| Rule | Calculation | Your Limit |
|---|---|---|
| 28% Rule | Max housing costs = 28% of gross monthly income | -- |
| 36% Rule | Max total debt = 36% of gross monthly income | -- |
Your maximum home price is limited by whichever rule is more restrictive.
About House Affordability Calculator
One of the biggest financial decisions you'll make is buying a home. Before you start house hunting, it's crucial to understand how much house you can actually afford based on your income and existing debts.
This calculator helps you determine a realistic price range for your home purchase, taking into account not just the mortgage payment, but also property taxes, insurance, HOA fees, and your existing debt obligations.
How House Affordability Calculator Works
- Annual Income: Your gross (before-tax) annual income.
- Monthly Debts: All monthly debt payments (car loans, student loans, credit cards, etc.).
- Down Payment: The amount you'll pay upfront toward the home purchase.
- Interest Rate: The mortgage interest rate (APR).
- Loan Term: The number of years to repay the mortgage (typically 15, 20, or 30 years).
- Property Tax: Annual tax rate (varies by location, typically 0.5-2%).
- Insurance & HOA: Ongoing monthly housing costs.
What This Calculator is Good For
- Pre-Purchase Planning: Understand your budget before house hunting.
- Lender Pre-Qualification: Get an estimate of what lenders might approve.
- Debt Impact Analysis: See how paying down debts increases your buying power.
- Scenario Planning: Compare different down payments, interest rates, and loan terms.
- Location Comparison: Adjust property tax rates for different areas.
- Financial Goal Setting: Plan how much to save for a down payment.
Limitations & Considerations
- Credit Score Not Considered: Your credit score affects interest rates and approval odds.
- PMI Not Included: Private Mortgage Insurance (required if down payment < 20%) is not factored in.
- Closing Costs: One-time closing costs are not included in this calculation.
- Property Tax Variation: Property taxes vary significantly by location and property type.
- HOA Fees: Not all properties have HOA fees; estimates may vary.
- Maintenance & Utilities: Ongoing home maintenance costs are not included.
- Lender Discretion: Individual lenders may have different lending criteria.
House Affordability Formula
Max Housing Payment = (Annual Income ÷ 12) × 0.28
Step 2: Calculate Maximum Total Debt Payment (36% Rule)
Max Total Debt = (Annual Income ÷ 12) × 0.36
Max Housing Payment = Max Total Debt - Existing Monthly Debts
Step 3: Use More Restrictive Limit
Housing Payment Limit = Lesser of the two amounts above
Step 4: Back-Calculate Maximum Loan Amount
Using the mortgage formula with the payment limit, solve for loan amount
Step 5: Calculate Maximum Home Price
Max Home Price = Max Loan Amount + Down Payment
Frequently Asked Questions
Pre-qualification is an estimate based on information you provide. Pre-approval involves a formal application and credit check. This calculator provides a pre-qualification estimate.
A larger down payment reduces the loan amount, which lowers your monthly payment. It also helps you avoid PMI (if 20%+) and shows lenders you're financially responsible.
The 28/36 rule is standard: housing costs should be ≤28% of income, total debt ≤36%. However, some lenders accept higher ratios for well-qualified borrowers.
Your credit score affects the interest rate you qualify for. A higher score typically means a lower rate, which increases your buying power. This calculator uses your entered rate.
Yes, absolutely. Pre-approval shows sellers you're a serious buyer and helps you focus on homes in your actual price range, saving time and effort.