Mortgage Affordability Calculator
Determine how much house you can afford based on your annual income, monthly debt obligations, down payment, and mortgage interest rate using standard lending rules.
Calculation Results
Your monthly gross income before taxes.
The maximum monthly mortgage payment (P&I) allowed under the stricter of the 28% front-end or 36% back-end debt ratio guidelines.
The maximum mortgage amount a lender will qualify you for.
The estimated maximum purchase price you can afford, combining your down payment and borrowing limit.
How This Calculator Works
To determine your maximum home purchase price:
- Input your annual gross (pre-tax) salary or household income.
- List your total recurring monthly debt payments (exclude rent or current mortgage payments).
- Provide the amount of cash savings you plan to use for your down payment.
- Enter current market mortgage interest rates and your preferred loan term.
The calculator compares both key debt ratios to provide a conservative, safe maximum budget and estimated maximum loan amount.
Formula & Calculations
Lenders use two primary debt-to-income (DTI) ratio rules to determine home affordability:
- Front-End Ratio (28% Rule): Your monthly housing costs (principal and interest) should not exceed 28% of your gross monthly income:
- Back-End Ratio (36% Rule): Your total monthly debt payments (housing costs + other debts like student loans, car loans, and credit cards) should not exceed 36% of your gross monthly income:
Front-End Limit = Monthly Gross Income × 0.28
Back-End Limit = (Monthly Gross Income × 0.36) - Monthly Debts
The maximum monthly housing payment is the lower of these two limits. To calculate the maximum mortgage loan amount, the formula reverses the amortization formula:
Loan Amount = Monthly Payment × [ (1 + r)^n - 1 ] / [ r(1 + r)^n ]
Where r = interest_rate / 12 / 100 and n = loan_term × 12.
Finally, your total budget is the borrowing limit plus your cash down payment:
Maximum Home Budget = Loan Amount + Down Payment
Step-by-Step Calculation Examples
Comfortable Buyer Example
An annual gross income of $100,000 with $500 in monthly debt payments, putting $50,000 down at 6.5% interest on a 30-year term.
- annual_income: 100000
- monthly_debts: 500
- down_payment: 50000
- interest_rate: 6.5
- loan_term: 30
- monthly_income: $8,333.33
- max_monthly_housing_payment: $2,333.33
- recommended_mortgage_amount: $369,158.58
- maximum_home_price: $419,158.58
Frequently Asked Questions
What is the 28/36 rule?
The 28/36 rule is a standard lending guideline. It states that a household should spend a maximum of 28% of its gross monthly income on housing expenses, and a maximum of 36% on total debt payments (including housing and other recurring debts).
Does the calculator include property tax or insurance?
This affordability calculator focuses strictly on Principal and Interest (P&I) payments. In reality, you must also budget for property taxes, homeowners insurance, and HOA fees, which will reduce your effective borrowing power by roughly 10% to 20%.
How does down payment affect affordability?
A larger down payment increases your affordability dollar-for-dollar. It also reduces your loan-to-value (LTV) ratio, which can eliminate the need for Private Mortgage Insurance (PMI) if you put down 20% or more.