Home affordability calculator

What this calculator does

It works backward from your income to the highest home price whose full monthly housing payment stays inside two debt-to-income limits that you choose.

Most people start the other way round: find a house, then check the payment. This calculator starts where a lender does, with your gross income and the debts you already pay, and it counts the whole housing payment: principal and interest plus property tax, homeowners insurance, private mortgage insurance (PMI) and homeowners association (HOA) dues.

Use it to set a price ceiling before you shop and to see which limit is holding you back. Both limits are inputs, so you can test a stricter budget as easily as a looser one.

How the math works

Debt-to-income (DTI) ratios compare monthly payments with gross monthly income: annual income before taxes, divided by 12. The front-end limit caps the housing payment alone. The back-end limit caps housing plus all other debt payments, so those debts come out of it first. Your housing budget is the lower of the two caps.

For any price, the housing payment adds up principal and interest on the loan (price minus down payment), a twelfth of the yearly property tax and insurance, HOA dues, and PMI when the loan is more than 80% of the price.

Finding the price: a search, not a formula

No tidy formula runs this backward, because tax grows with the price and PMI switches on at a threshold, so the calculator searches. It starts with a range that must contain the answer, from zero up to a price that is clearly over budget, and tries the midpoint. If that payment fits, the answer is at least that high and the bottom of the range moves up; if not, the top moves down. Each round halves the range, and after a few dozen rounds it is narrower than a cent. This is called bisection, and it works because a higher price never lowers the payment. The result is rounded down to the nearest $100.

Where 28% and 36% come from

The starting limits follow a traditional rule of thumb: at most 28% of gross income for housing, and 36% for housing plus other debts. It is a convention, not a requirement. Lenders and loan programs set their own limits and may allow higher ratios when the rest of an application is strong, which is why both limits here have sliders.

Why 20% down creates a step

A fixed amount of cash becomes a smaller share as the price rises. Past five times your cash you are putting down less than 20%, and on a conventional loan that is usually where PMI begins, charged on the whole loan. So the payment jumps instead of rising smoothly. With $40,000 down, a $200,000 home has a $160,000 loan, exactly 80%, and no PMI; at $200,100, PMI starts and the payment rises from $1,259.28 to $1,326.69. When a budget falls inside that jump, the calculator stops at the 20% mark and says so.

Worked example

A household earns $84,000 a year, pays $600 a month on a car loan and student loans, and has $40,000 for a down payment. They enter a 6% rate, a 30-year term, a 1.2% property tax rate, $1,200 a year for insurance, PMI at 0.5%, no HOA, and the 28/36 limits.

Without the $600 of other debts, the front-end limit would bind instead and the price would rise to $285,500. With $60,000 down instead of $40,000, the result stops at exactly $300,000: the payment there is $1,838.92, $81 under the budget, but $300,100 would add PMI and lift it to $1,939.66.

Common mistakes

1. Entering take-home pay. The ratios use gross income, before taxes and deductions. Net pay produces a figure you cannot compare with a lender's.
2. Leaving debts out, or putting rent in. Count every payment you will still make after buying. Rent you will stop paying is replaced by the new housing payment, so it does not belong here.
3. Putting all your savings into the down payment. Closing costs, moving and a cash cushion come from the same pot. Enter only what you will actually put down.
4. Treating the maximum as a target. The limits ignore utilities, repairs, childcare and saving. The result is the most the limits allow, not a price that fits every budget.
5. Borrowing a tax rate from somewhere else. Property tax scales with the price, so the local rate matters. Use one from tax records or listings where you are looking.

Limits of this estimate

• It applies the limits you enter. A lender also weighs credit history, savings left after closing, employment, the loan program and the property.
• Lenders have their own rules for counting income, such as bonuses or self-employment earnings, and debts, so their ratios may differ from yours.
• Tax as a share of the price is an approximation. The real bill depends on the assessment and can change after a sale.
• The PMI rate is a stand-in until you have a quote. Government-backed loans charge mortgage insurance differently.
• Closing costs, maintenance and utilities are not included, and the rate is assumed fixed for the whole term.

Frequently asked questions

Next steps: with a specific home in mind, the debt-to-income calculator checks both ratios line by line. The mortgage payment calculator shows the amortization schedule at this price, and the cash to close calculator estimates what you need on closing day.

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