Home Affordability Calculator

Understanding the Home Affordability Calculator

Determining "how much house you can afford" is one of the most critical steps in the home-buying process. This calculator is designed to give you a realistic estimate based on key financial data and common lending guidelines, helping you set a responsible budget for your house hunt.

How It Works

The calculator uses the widely accepted 28/36 rule to determine an affordable monthly mortgage payment, and then works backward to find the corresponding home price.

• Gross Annual Income: Your total income before taxes.
• Total Monthly Debts: This includes minimum payments on credit cards, auto loans, student loans, and any other debt obligations.
• Down Payment: The amount of cash you have saved to put toward the home purchase.
• Interest Rate & Loan Term: These factors determine the size of the loan you can qualify for with a given monthly payment.

The 28/36 Rule

This is a debt-to-income (DTI) ratio that lenders use to assess risk. The calculator applies it as follows:

1. It calculates 28% of your gross monthly income to determine the maximum recommended housing payment (PITI: Principal, Interest, Taxes, Insurance).
2. It calculates 36% of your gross monthly income to determine the maximum recommended total debt payments (including housing). It then subtracts your existing monthly debts from this amount.
3. The lower of these two resulting figures is used as your affordable monthly payment. From there, the calculator determines the loan size you could get with that payment and adds your down payment to arrive at the final affordable home price.

Frequently Asked Questions