Home Affordability Calculator

The home affordability calculator uses the 28/36 rule to determine the maximum home price you can responsibly afford. The front-end ratio limits housing costs to 28% of gross monthly income, while the back-end ratio limits total debt payments to 36%. This prevents you from becoming house-poor.

What this calculator does

Lenders look at two key ratios: your front-end ratio (housing costs ÷ gross income, max 28%) and back-end ratio (all debts ÷ gross income, max 36%). FHA loans allow higher ratios (31/43), but that doesn't mean you should max them out.

How it works

Your down payment dramatically affects affordability. On a $400,000 home, 20% down ($80,000) avoids PMI and gives a $320,000 mortgage. With 5% down ($20,000), you're financing $380,000 plus $150-250/month PMI — reducing your buying power by $40,000-60,000.

Don't forget hidden costs: property taxes (0.5-2.5% of home value annually), homeowner's insurance ($1,200-3,000/year), HOA fees ($200-500/month in condos), maintenance (1% of home value/year), and utilities. These add $500-1,500/month beyond your mortgage payment.

Formula

Maximum Affordable Home Price

Max Price = (Monthly Income × 0.28 − Taxes − Insurance − PMI) ÷ (Monthly Mortgage Rate Factor) + Down Payment

Monthly Income × 0.28 gives your maximum housing payment (28% rule). Subtract estimated taxes, insurance, and PMI to get the maximum mortgage payment, then calculate the loan amount that payment supports.

Worked example

Household income $120,000/year, $600/month car payment, $60,000 saved for down payment, 6.5% rate.

  1. Gross monthly income: $10,000
  2. 28% front-end max housing: $2,800/month
  3. 36% back-end max total debt: $3,600 − $600 car = $3,000 max housing
  4. Binding constraint: $2,800/month (front-end is lower)
  5. Estimated taxes + insurance: $550/month
  6. Available for mortgage: $2,250/month
  7. At 6.5% for 30 years: supports ~$357,000 mortgage
  8. Plus $60,000 down payment

Result: Maximum affordable home price: ~$417,000 with 14.4% down. Monthly payment: $2,800 total (mortgage + tax + insurance).

Frequently asked questions

How much house can I afford on a $100,000 salary?

With 20% down and 6.5% rate: approximately $350,000-$400,000. With 10% down: $300,000-$350,000. Exact amount depends on debts, taxes, and insurance in your area.

What is the 28/36 rule?

Housing costs should not exceed 28% of gross income (front-end ratio), and total debt payments should not exceed 36% (back-end ratio). These are the standard qualifying ratios used by conventional mortgage lenders.

How much down payment do I need?

Conventional loans require 3-20%. FHA loans require 3.5%. VA loans require 0%. However, 20% down avoids Private Mortgage Insurance (PMI), which can cost $100-300/month.

Should I max out what the bank will lend me?

No. Banks approve based on debt ratios, not your comfort level. A mortgage at 28% of income leaves little room for emergencies, repairs, or lifestyle. Aim for 20-25% for financial flexibility.