Home Affordability Calculator

How Much House Can You Afford?

The question has two answers and they are rarely the same number. A lender's answer is the largest loan its underwriting will approve. A household's answer is the payment that still leaves room for retirement contributions, childcare and a failed water heater. The 28/36 rule sketches the first and, used honestly, disciplines the second.

Its symmetry is the useful part. Existing debt shrinks the house budget through the 36% side, so a $700 car payment is not a separate problem sitting next to the mortgage — it is a smaller mortgage.

Once a price looks real, the payment behind it — taxes, insurance and HOA included — belongs in the Mortgage Calculator.

The 28/36 Rule in One Line

Two ceilings are drawn from the same gross monthly income. The housing ratio allows 28% of it for the whole housing payment. The total-debt ratio allows 36% for that housing payment plus every other monthly debt payment you already owe. Whichever ceiling is lower is the one you are standing under, and the result line names it.

Lenders call these the front-end and the back-end ratio. Neither figure is written into a federal rule — the pair is an industry convention, and the published limits bracket the 36% rather than sit above it. Fannie Mae's own guide sets the maximum total ratio for a manually underwritten loan at "36% of the borrower's stable monthly income", adds that this "can be exceeded up to 45% if the borrower meets the credit score and reserve requirements", and allows more still through its automated path: "For loan casefiles underwritten through DU, the maximum allowable DTI ratio is 50%."

What the Calculator Needs

Five fields, of which only two must be typed:

• Annual gross income — pre-tax, the whole household as a single figure. Anything below $10,000 returns "Enter your annual gross income" instead of a price.
• Monthly debt payments — the recurring obligations a credit report shows: car loans, student loans, personal loans, card minimums, child support. Not groceries, utilities or phone bills. The box arrives pre-filled with $400, and a blank counts as zero.
• Down payment saved — the cash going into the purchase. Pre-filled with $40,000; a blank counts as zero.
• Mortgage rate — the annual rate you expect to be quoted. Empty, zero, negative or above 20 returns "Enter a mortgage rate".
• Term — 30 or 15 years, as a two-button control, with 30 years selected when the page opens.

Income and rate arrive empty, so the result panel is blank on arrival: it fills in when you press Calculate, and again on each press. Typing alone does not recalculate anything.

Gross Income, Not Take-Home

Both ceilings are drawn against gross pay, which is why the output can feel aggressive against a real bank statement. On $90,000 a year, gross monthly income is $7,500 and the housing ceiling is $2,100. If withholding, payroll taxes, health premiums and a retirement contribution bring the deposit down to $5,600, that same $2,100 is 37.5% of the money that actually arrives. None of those deductions exist inside the rule.

This is the main reason two households with identical incomes experience the same approved price completely differently. A high state tax rate and a 10% retirement contribution do not move the 28% ceiling by a cent, and they move the payment's real weight a great deal.

How Do You Calculate Home Affordability?

Four moves: two ceilings, the tighter one, a split, and an amortization.

The Home Affordability Formula

Monthly gross income = annual gross income ÷ 12
Housing cap          = 0.28 × monthly gross income
Total-debt cap       = 0.36 × monthly gross income − existing monthly debts
Housing budget       = the smaller of the two caps
Principal & interest = 0.80 × housing budget
Loan                 = P&I × (1 − (1 + r)^−n) ÷ r
Home price           = loan + down payment

r = annual rate ÷ 1200   (the monthly rate)
n = years × 12           (the number of payments)

The 0.80 is the line to watch. It is fixed inside the tool rather than entered: one dollar in five of the housing budget is reserved for property taxes and homeowners insurance before the mortgage arithmetic starts. The last line is why the answer is a price rather than a loan — your savings are added back at the end.

Nothing in the formula is progressive or tiered. Every step is a straight multiplication, which is why the outputs move in straight lines that are easy to check by hand.

Step by Step

Working through $90,000 of income, $400 a month of existing debts, $40,000 saved, 6.5% and 30 years:

• Monthly gross income: $90,000 ÷ 12 = $7,500.
• Housing cap: 28% of $7,500 = $2,100.
• Total-debt cap: 36% of $7,500 = $2,700, less the $400 already committed = $2,300.
• The smaller of $2,100 and $2,300 is $2,100, so the 28% housing cap binds and the budget is $2,100 a month.
• Principal and interest: 80% of $2,100 = $1,680. The other $420 is the tool's allowance for taxes and insurance.
• Loan: $1,680 × 158.2108 (the 30-year factor at 6.5%) = $265,794.
• Price: $265,794 + $40,000 down = $305,794.

Every figure there except the factor is printed on screen, and the factor is recoverable from the panel itself: the loan divided by the principal-and-interest line, $265,794 ÷ $1,680.

Worked Example: $90,000 With $400 of Debts

Those inputs return four lines, in this order:

• ≈ $305,794 home price
• Budget: $2,100/month housing (limited by the 28% housing cap)
• ≈ $1,680 to principal & interest → $265,794 loan at 6.5%/30y + $40,000 down
• Assumes ~20% of the housing budget covers taxes and insurance — high-tax areas shrink the price; lender pre-approval is the real number

Change one input — the debts, from $400 to $800 — and the binding cap flips. The budget drops to $1,900, the second line reads "limited by the 36% total-debt cap (your existing debts bind first)", and the price falls to $280,480. An extra $400 a month of car and card payments costs $25,314 of house.

That is the sharpest thing this calculator does. It prices debt in units of house, a currency people find much harder to ignore than a monthly minimum.

Where the Factor Comes From

The bracketed term is the present-value factor of an annuity — what a stream of equal monthly payments is worth today at a given rate. At 6.5% over 30 years it is 158.2108, so each $1 of monthly principal and interest supports $158.21 of loan, and each $100 supports $15,821.

That one number explains the page's rate sensitivity. At 5.5% the factor is 176.12; at 7.5% it is 143.02. The payment you can afford has not moved between those rates. What a dollar of it buys has.

Home Affordability Chart by Income

Prices at 6.5% over 30 years, with no other monthly debt and $40,000 down. Every row is this calculator's own output. To reproduce one, type the income in the first column and clear the pre-filled $400 out of Monthly Debt Payments — that default sits above the crossover at $50,000 and pulls the first row down to $179,226, while every row from $60,000 up is unaffected by it.

The loan column is the one worth memorizing: at 6.5% over 30 years the 28% cap supports the same multiple of annual income in every row — 2.95327, a shade under three times income. Round it to 2.95 for mental arithmetic and the estimate lands about $163 light per $50,000 of income. The price column is not a constant multiple, because the $40,000 down payment is a far larger share of a $187,663 house than of a $630,654 one.

The steps are linear too. From $50,000 upward, each additional $10,000 of annual income adds $29,533 to the price at this rate and term.

The Same Income at Other Rates

$90,000 of income, $400 a month of debts, $40,000 down, 30 years — only the rate changes:

A full point below 6.5% is worth $30,090 of price; a full point above costs $25,525. The asymmetry is the curve of the factor rather than a rounding artifact — the same one-point step is worth more when rates start lower.

Set against that, a raise struggles to compete: the $30,090 a full point of rate is worth is slightly more than the $29,533 an extra $10,000 of salary adds, and the rate moved without anyone's permission.

Thirty Years or Fifteen

The term changes what the budget buys, not the budget. On the same $90,000 inputs the housing budget stays $2,100 and principal and interest stay $1,680 on either term. The 15-year factor is 114.80 against the 30-year 158.21, so the loan falls from $265,794 to $192,858 and the price from $305,794 to $232,858.

That is $72,936 less house for an identical monthly payment. What comes back is the far shorter interest bill: multiply the panel's $1,680 by 360 payments and the 30-year loan costs $339,006 in interest, against $109,542 over 180 payments on the smaller 15-year loan. The tool prints neither figure — that multiplication is yours to do.

How Monthly Debt Payments Change the Answer

The 36% cap is inert until existing debt grows large enough to bite, and there is an exact point at which that happens.

Card minimums are usually the first debt worth clearing, and the schedule for that lives in the Credit Card Payoff Calculator.

The Crossover Sits at 8% of Gross Monthly Income

The two caps are eight percentage points apart, so the total-debt cap only becomes the binding one once existing payments exceed 8% of gross monthly income — annual income divided by 150. At $60,000 that threshold is $400 a month; at $90,000 it is $600; at $120,000, $800; at $200,000, $1,333.

Below the line, paying a debt down changes the price by nothing at all, because the 28% housing cap is already the constraint. Above it, each $100 a month of debt cleared is worth $12,657 of price at 6.5% over 30 years: $100 of budget becomes $80 of principal and interest, and $80 × 158.2108 is $12,657.

When the two caps land on the same number the result line can name either one, and the price is identical either way. At $60,000 with exactly $400 of debts the panel credits the 36% cap and returns $217,196 — the same price it returns for that income with no debts whatsoever.

The Debt Ladder at $90,000

Income $90,000, down payment $40,000, rate 6.5%, term 30 years:

The first three rows are the surprise. A borrower carrying $600 a month of payments and one carrying none are handed the identical $305,794, because neither has reached the crossover. The standing advice to clear the car loan before house-hunting is worth nothing to the first of them and $113,912 to the borrower sitting at $1,500 — more than the entire down payment in this example.

Where the 36% Cap Runs Out

If existing payments reach 36% of gross monthly income the housing budget is zero, and the tool declines to price a house at all: it returns "Existing debts consume the 36% cap — paying them down comes before house shopping". On $40,000 of income, $1,200 a month of payments does it exactly, since 36% of $3,333 gross monthly income is $1,200.

That message is the only judgment this calculator makes. Everywhere else it prices whatever it is handed.

How Much Down Payment Do You Need?

The down payment enters at the very last step of the arithmetic, which makes its effect unusually easy to read — and slightly too flattering.

If the figure in that box is a target rather than a balance, the months it takes to reach it are in the Savings Calculator.

It Moves the Price Dollar for Dollar

The budget sets the loan and the down payment is added to it afterwards. With $90,000 of income, $400 of debts, 6.5% and 30 years, the loan is $265,794 no matter what you have saved: the price is $265,794 with nothing down, $285,794 with $20,000, $305,794 with $40,000 and $365,794 with $100,000.

So $10,000 more saved buys exactly $10,000 more house here, and not a dollar beyond it. That is a simplification, and it errs in the generous direction: it credits you the cash without charging you for anything a thin down payment costs.

Below 20 Percent, Mortgage Insurance Appears

The Consumer Financial Protection Bureau describes private mortgage insurance as "a type of mortgage insurance you might be required to buy if you take out a conventional loan with a down payment of less than 20 percent", and is blunt about whom it serves: "PMI protects the lender—not you—if you stop making payments on your loan." This page has no PMI field, so a premium that would eat into the same monthly budget is deducted nowhere.

PMI is not permanent, at least. You may ask the servicer to cancel PMI once the balance is scheduled to fall to 80 percent of the home's original value, and the servicer must terminate it automatically at 78 percent, provided the payments are current.

Zero-Down Lending Is Not Hypothetical

The Department of Veterans Affairs reports that nearly 90% of all VA-backed home loans are made without a down payment. Entering $0 models that case honestly here: the loan and the price become the same number, $265,794 on the example inputs, and the monthly budget is unchanged, because in this model the down payment never touched the budget in the first place.

Closing Costs Come Out of the Same Savings

The field is labeled Down Payment Saved, and every dollar of it goes straight into the price. Closing costs, moving costs and the reserve a lender wants to see in the account after closing all come from that same balance. Typing the whole balance therefore overstates the price by however much of it never reaches the seller.

How to Read Your Result

A successful calculation always returns four segments — never three, never five — and each answers a different question.

The Four Lines

• The price, as the large readout: the loan plus your down payment, and the only line most people read.
• The monthly housing budget, followed by which of the two caps produced it.
• The split: principal and interest, the loan it supports, the rate and term used, and the down payment added back.
• The standing note about the 20% taxes-and-insurance assumption and about pre-approval.

The fourth line never changes. It is not a warning triggered by your particular numbers — it prints on every result, which is exactly why it is easy to stop seeing.

Which Cap Bound, and What That Means

If the second line says "limited by the 28% housing cap", debt is not what is holding you back. Income is, and clearing the car loan will not raise the price by a dollar. If it says "limited by the 36% total-debt cap (your existing debts bind first)", the opposite holds, and the ladder above prices what each payment is costing you in house.

Reading that one label correctly is worth more than any other line here, because it tells you which lever actually moves. Advice to clear the debts before house-hunting is inert for anyone the first message applies to.

The $420 Hiding in the Split

On the example inputs the budget is $2,100 while principal and interest are $1,680, so the tool has quietly set aside $420 a month for property taxes and homeowners insurance. Against a $305,794 house that is $5,040 a year, about 1.65% of the price. Check it against a real listing's tax bill and an insurance quote for your area before trusting the price.

If the true figure is higher, the correction is arithmetic. Every $100 a month above the allowance is $100 less principal and interest, which at 6.5% over 30 years is $15,821 less house. A county running $200 a month over the allowance turns $305,794 into $274,152.

Both costs are usually collected through an escrow account, and the CFPB is clear that the amount moves: "Your property taxes and insurance premiums can change from year to year. Your escrow payment—and with it, your total monthly payment will change accordingly." A budget that only just fits is fitting against a number that does not hold still.

When the Panel Refuses

Only three conditions stop the calculation, each with its own message:

• "Enter your annual gross income" — the income box is empty or below $10,000.
• "Enter a mortgage rate" — the rate is empty, zero, negative, or above 20.
• "Existing debts consume the 36% cap — paying them down comes before house shopping" — the debt payments alone reach 36% of gross monthly income, leaving nothing for housing.

Nothing else is rejected. The debt and down payment boxes take a blank as zero and strip every character that is not a digit or a decimal point, so "$1,200" reads as 1200 — and so does "-400", because the minus sign is stripped along with the dollar sign.

Limits: When This Calculator Does Not Apply

This is a screen, not an approval, and the distance between those two things is where most of the disappointment in home buying lives.

It Is Not Underwriting

A lender's decision rests on credit score, employment history, verified income, reserves left after closing and the property itself, none of which this page asks about. The CFPB's ability-to-repay rule requires only that a lender "consider and verify your current monthly income or assets…and your monthly debt", measured as a debt-to-income ratio or as residual income, and it names no threshold at all.

Fannie Mae's published ceiling begins at this same 36% for a manually underwritten loan, then stretches to 45% where the credit score and reserve requirements are met and to 50% for a file underwritten through Desktop Underwriter, which is why a pre-approval letter routinely beats the figure here. That letter is not a promise either: the CFPB notes it "is not a guaranteed loan offer, but it should provide enough information for sellers in your area to take it seriously." Read this page's price as the conservative end of a range whose top end a lender will quote you happily.

Costs the Ratios Never See

The 28/36 screen measures debt, not living. Nothing in it accounts for:

• Childcare, which in many households is the size of a second mortgage payment.
• HOA or condo dues, which underwriters do count and this tool has no field for.
• Maintenance and repairs on a house nobody has inspected yet.
• Utilities, which scale with square footage while the payment does not.
• Retirement contributions, which leave before the money you actually spend arrives.
• Income you cannot rely on — commission, overtime, a second job, a partner planning to stop working.

None of these make the calculation wrong. They make the top of its range a bad place to shop.

What the Model Assumes

Five simplifications are baked in and cannot be switched off:

• Taxes and insurance take exactly 20% of the housing budget, in every county.
• The rate holds for the whole term. On an adjustable-rate loan, as the CFPB puts it, "the interest rate may go up or down", and this arithmetic cannot represent that.
• Only 30- and 15-year terms exist. A 20-year loan cannot be entered.
• There is no PMI, no HOA, no closing costs and no loan limit — nothing caps the loan at a conforming ceiling.
• A single income figure stands for the entire household, with no averaging for self-employment or variable pay.

When to Set the Answer Aside Entirely

Two situations make the number meaningless rather than merely approximate. If the down payment in the box is money that does not exist yet, the price is fiction carried to the dollar. And if the income is new — a first year of self-employment, a job three months old — a lender will not count it the way this box does, so the honest reading is a ceiling you cannot reach yet.

Used within those bounds it does one job well: it converts a salary and a rate into a price, and it tells you which of the two caps you are actually fighting.