House Affordability Calculator

How lenders decide what you can afford

Banks look at your debt-to-income ratio (DTI) – your monthly debt payments divided by your gross monthly income. Two limits are common:

• Front-end ratio – the housing payment (principal, interest, property tax, insurance, HOA) should not exceed about 28% of gross income.
• Back-end ratio – all debt payments together, including the new mortgage, should stay under about 36%.

FHA loans allow 31% and 43%, and many lenders go up to 43–45% back-end for borrowers with good credit. The calculator applies the lower of the two limits and tells you which one is binding.

Worked example

An income of $95,000 a year is $7,917 a month. 28% of that is a housing budget of $2,217. With $450 of other debts the back-end limit (36%) would allow $2,400, so the front-end limit is the binding one. At 6.5% for 30 years, 1.1% property tax and $1,800 a year of insurance, that budget buys a home of about $320,000 with $40,000 down: a loan of $280,490 and principal and interest of $1,772.88 a month.

What moves the number most

• The interest rate – each percentage point changes the price you can afford by roughly 7–9%. The table under the result shows the price at nearby rates.
• Other debts – every $100 of monthly car or card payments can cut the price you can afford by about $13,000–14,000 when the back-end limit applies.
• Property tax and HOA fees – they come out of the same housing budget as the mortgage.

Affordable is not the same as comfortable

Lender limits tell you the most you can borrow, not what fits your budget. Leave room for maintenance (about 1% of the home value a year), an emergency fund and savings. Many planners suggest keeping the total housing cost nearer 25% of gross income.

Frequently asked questions