How to use this home affordability calculator
- Annual gross income — your household’s income before tax. Lenders work from gross income, so this calculator does too.
- Monthly debt payments — the minimum payments on car loans, student loans, credit cards and any other loans. Leave out rent, because the new mortgage replaces it.
- Down payment — the cash you will put toward the price. Keep closing costs separate; you need cash for those as well.
- Interest rate and term — the rate you expect to be offered, and a 30-, 20- or 15-year loan.
- Property tax, insurance, HOA and PMI — the costs that come with the home. PMI (private mortgage insurance) is a yearly percentage of the loan, charged only when you put down less than 20%.
- Lender guideline — Conservative 28/36 or Stretch 31/43, two common lender guidelines.
The results show the maximum price, the loan and the full monthly payment split into its parts. The table under the calculator repeats the answer at rates one percentage point lower and higher. To test a specific home, use the mortgage calculator.
How the maximum price is calculated
The guideline sets two limits on your monthly housing payment, each as a share of gross monthly income:
- Front-end limit: housing alone can take up to 28% of income (31% on the stretch setting).
- Back-end limit: housing plus all your other debt payments can take up to 36% (43% on the stretch setting). Your debts come off the top, so the room left for housing is 36% of income minus your debts.
There is no single formula for the price, because property tax and PMI both depend on it. So the calculator searches. It tries a price, works out the full payment, and halves the range of possible prices each time (a bisection search) until it finds the highest whole-dollar price whose payment fits the limit.
Worked example
The default inputs describe a household earning $105,000 a year ($8,750 a month) with $450 of monthly debt payments and $40,000 to put down. The loan is 30 years at an illustrative 6.8%, with property tax of 1.1% a year, insurance of $1,600 a year, no HOA fees, PMI at 0.5% a year and the 28/36 guideline.
- Front-end limit: 28% × $8,750 = $2,450 a month.
- Back-end limit: 36% × $8,750 − $450 = $3,150 − $450 = $2,700 a month.
- The lower figure, $2,450, applies, so the front-end limit is the one that binds.
The highest price that fits is $330,350, with a loan of $290,350. Here is the check:
| Part of the payment | How it’s worked out | Per month |
|---|---|---|
| Principal & interest | $290,350 at 6.8% over 30 years | $1,893 |
| Property tax | $330,350 × 1.1% ÷ 12 | $303 |
| Home insurance | $1,600 ÷ 12 | $133 |
| PMI | $290,350 × 0.5% ÷ 12 | $121 |
| Total | $2,450 |
The $40,000 down payment is 12.1% of the price, so PMI applies. One dollar more on the price would take the payment to $2,450.01, just over the limit.
Notice that the $450 of debts doesn’t change the answer. Under 28/36 the back-end limit takes over only when your debts are more than 8% of gross income, which is $700 a month here. At $1,000 of debts the back-end limit falls to $2,150 and the maximum price drops to $292,146. At $1,500 it is $228,472. If your debts already take 36% of your income or more, the calculator tells you that no payment fits instead of showing a price.
What moves the answer most
Starting from the same example, here is the maximum price when one input changes:
| Change | Maximum price | Difference |
|---|---|---|
| None (the example) | $330,350 | – |
| Rate 5.8% instead of 6.8% | $356,628 | +$26,278 |
| Rate 7.8% instead of 6.8% | $307,228 | −$23,122 |
| Stretch 31/43 guideline | $363,778 | +$33,428 |
| A loan with no PMI | $346,619 | +$16,269 |
| 15-year term | $263,306 | −$67,044 |
| $1,000 of monthly debts | $292,146 | −$38,204 |
The rate and the term matter most, because they decide how much loan each dollar of payment supports. A 15-year loan builds equity much faster but supports far less; see 15 vs 30-year mortgages for that trade-off. The stretch guideline adds buying power, but a payment of 31% of gross income leaves less room for saving, repairs and surprises.
What this calculator does not include
- Closing costs, moving costs and the cash reserves some lenders want you to keep after closing.
- Your credit score, job history and the rules of a particular loan program. These decide your rate and whether you’re approved, and a lender may allow more or less than these guidelines.
- Maintenance, repairs and utilities. Lenders leave them out of the ratios, but you still pay them.
- Changes over time. It assumes a fixed rate, and that tax, insurance and HOA fees stay at the amounts you enter. It also treats PMI as a flat percentage of the loan; real quotes depend on your credit and down payment.
For a step-by-step guide, read how much house can I afford. If you’re still deciding whether to buy at all, try the rent vs buy calculator.
Frequently asked questions
What is the 28/36 rule?
It is a common lender guideline. Your housing payment should be no more than 28% of your gross monthly income, and your housing payment plus all other debt payments no more than 36%. It is a guideline rather than a law, and each lender and loan program sets its own limits.
Which debts should I include?
Include the minimum required payment on every loan and credit card, even if you usually pay more. If a card asks for $40 and you pay $300, enter $40. Leave out rent, utilities, phone bills and groceries.
How much does PMI reduce what I can afford?
In the example above, PMI takes $121 a month out of the $2,450 budget, which costs $16,269 of buying power. PMI usually ends once you have enough equity; our guide on how to get rid of PMI explains when.
Should I spend the maximum?
Treat it as a ceiling. The guideline doesn’t know about childcare, retirement saving or how secure your income is. Many buyers aim below the maximum so a repair bill or a rise in insurance doesn’t stretch them.
Can I save my calculation?
Members can save any calculation and reopen it later from their account. The calculator itself is free for everyone, with instant results and no sign-up. See membership.
Results are estimates for educational purposes and are not financial advice. See our disclaimer.