Home Affordability Calculator

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Find out how much home you can afford using the 28/36 rule. Based on income, debts, down payment, and current rates.

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Maximum Home Price You Can Afford

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Max Monthly Payment$0
Loan Amount$0
DTI Ratio0%

📐 Formula

Max Housing Payment = Gross Monthly Income × 28%. Max Total Debt = Gross Monthly Income × 36%. Loan = MaxPayment / Monthly Rate Factor

How to Use the Home Affordability Calculator

1

Enter your gross annual income

Input your total pre-tax household income from all sources. Include both partners' incomes if buying jointly. Lenders use gross income for qualification, not net take-home.

2

Enter monthly debt payments

Include all minimum monthly obligations: car loans, student loans, credit card minimums, personal loans. Do not include rent — it will be replaced by the mortgage payment.

3

Enter down payment and rate

The down payment reduces the loan amount and eliminates PMI if it reaches 20%. The interest rate directly determines monthly payment — use a current rate quote rather than an estimate.

4

Review the 28/36 rule output

28% is the maximum share of gross income recommended for housing costs (PITI). 36% is the maximum total debt-to-income ratio including all debts. Most conventional lenders allow up to 43–45% DTI with strong compensating factors.

How Much House Can You Actually Afford?

Lender qualification and actual affordability are not the same thing. A lender may approve a mortgage that leaves you house-poor — technically qualifying on paper but with no margin for savings, emergencies, or lifestyle expenses. The maximum loan amount a lender offers is a ceiling, not a recommendation. A more conservative framework: keep total housing costs (mortgage, tax, insurance, HOA, maintenance) below 25–28% of net take-home pay rather than 28% of gross income.

The difference is material. A household earning $90,000 gross ($72,000 net after tax and FICA) using 28% of gross could qualify for $2,100/month in housing costs. Using 28% of net yields $1,680/month — a $420/month difference, or approximately $80,000 less in maximum purchase price at 7% rates. The net income approach leaves significantly more financial cushion.

The Hidden Costs New Buyers Underestimate

First-time buyers routinely underestimate the true cost of homeownership. Beyond the mortgage payment: property tax (average 1.1% of home value annually, or $440/month on a $480,000 home); homeowner's insurance ($1,500–$3,000/year depending on location and coverage); PMI if down payment is below 20% (0.5–1.5% of loan amount annually, or $200–$600/month on a $400,000 loan); and maintenance (budget 1–2% of home value annually for ongoing repairs, replacement, and improvements — $4,800–$9,600/year on a $480,000 home). These four costs routinely add $1,000–$2,000/month above the principal-and-interest payment shown on mortgage calculators.

Down Payment: Impact Beyond the Loan Size

A 20% down payment eliminates PMI and reduces the loan amount, but the opportunity cost of tying up that capital matters too. At current savings rates (4–5% HYSA) and historical equity returns (7–10% annually), the return on a larger down payment versus investing the difference depends on your mortgage rate. If your rate is 7% and you can earn 9% investing the same capital, a smaller down payment may be financially superior — the math changes with every rate environment. Use the mortgage calculator alongside this affordability tool to model total cost scenarios.

Calculating home affordability in South Africa? SA homebuyers need to factor in transfer duty, conveyancing fees, and bond registration costs on top of the purchase price — costs that don't have a direct US equivalent. SA Property Tools provides South African-specific home affordability and bond repayment calculators that account for all SA upfront costs.

How to Calculate Home Affordability by Hand: Worked Example

Take a $90,000 annual income ($7,500/month), a 5% mortgage rate, a 30-year term, 20% down, and $400/month in existing debt (car loan, student loan, minimum credit card payments).

Front-end ratio (28% rule): housing costs alone shouldn't exceed 28% of gross monthly income: $7,500 × 0.28 = $2,100 maximum PITI (principal, interest, taxes, insurance).

Back-end ratio (36% rule): total debt including housing shouldn't exceed 36%: $7,500 × 0.36 = $2,700, minus the existing $400 in debt = $2,300 available for PITI.

The binding constraint is whichever is lower — here, the front-end ratio at $2,100. Subtracting an estimated $300/month for taxes and insurance leaves $1,800 for principal and interest. Solving the amortization formula in reverse at 5% over 360 months, $1,800/month supports a loan of roughly $335,000. With 20% down, that corresponds to a home price near $419,000.

Why does existing debt reduce your home budget so directly?

Because the back-end ratio counts all debt, every $100 of existing monthly debt payment reduces available PITI by the same $100 — in this example, the $400 car and student loan payment is the reason the back-end limit ($2,300) sits below what 36% of income alone would allow ($2,700). Paying off a $400/month debt before applying for a mortgage can meaningfully raise the affordable price range, sometimes more than a modest raise would.

What Costs Do First-Time Buyers Typically Underestimate?

Which "hidden" costs sit outside the PITI calculation?

PITI covers principal, interest, taxes, and insurance — but not maintenance (commonly budgeted at 1% of home value annually, or about $4,190/year on the property above), HOA dues where applicable, or utilities, which are often higher in a larger home than a comparable rental. Buyers who size their offer to the maximum the calculator allows frequently find these add-ons squeeze the budget in year one.

Does a larger down payment always improve affordability?

It improves it in two ways at once: a smaller loan lowers the required P&I payment, and crossing the 20% down threshold typically eliminates PMI (private mortgage insurance), which can run 0.5–1.5% of the loan annually. On the $335,000 loan above, avoiding PMI alone can be worth $1,400–$5,000 per year — money that effectively increases the price you can afford at the same monthly payment.

How much does the interest rate move the affordable price?

Significantly. Re-running the example at 6.5% instead of 5% (same $1,800 P&I budget) drops the supportable loan to roughly $284,000 — about $51,000 less home for the identical monthly payment. This is why affordability shifts even when income and debt stay exactly the same: a change in prevailing mortgage rates alone can move the ceiling by tens of thousands of dollars.

Frequently Asked Questions

The 28% rule limits housing costs (mortgage, tax, insurance) to 28% of gross monthly income. The 36% rule limits total debt payments (housing + car + student loans) to 36%. Lenders use these as qualifying guidelines.
Conventional loans typically require 5–20% down. FHA loans allow as little as 3.5% with a 580+ credit score. Putting 20% down avoids Private Mortgage Insurance (PMI), which adds 0.5–1.5% annually.
For conventional loans: 620 minimum, 740+ for best rates. FHA loans: 580 for 3.5% down. VA loans: no minimum (but lenders typically want 620+). A higher credit score saves tens of thousands over a 30-year mortgage.
Using the 28/36 rule: 28% of $80,000 gross annual income = $22,400/year = $1,867/month for PITI. At 7% over 30 years, this supports a loan of approximately $280,000. With 10% down: home price around $311,000. With 20% down: $350,000. Factor in property taxes, HOA fees, and insurance — they reduce the loan amount you can support.
The 28/36 rule states: spend no more than 28% of gross monthly income on housing (PITI — principal, interest, taxes, insurance), and no more than 36% on all debt combined (housing + car + student loans + credit cards). Lenders may approve up to 43–50% DTI, but staying closer to 36% provides a financial safety buffer.

Sources & Methodology

Calculations are based on the most current publicly available data from authoritative government and industry sources: