Mortgage Affordability Calculator
Before you fall in love with a house, you need an honest answer to one question: how much mortgage can I afford? The amount a lender will approve is not the same as the amount that leaves you comfortable each month, and stretching for the maximum approval is how many buyers end up house poor, with a beautiful home and no money left for anything else. This free mortgage affordability calculator uses the classic 28/36 rule, the guideline lenders have relied on for decades, to estimate a responsible home price from your income and debts. You enter your annual gross income, your other monthly debt payments, your down payment, the interest rate, the loan term, and your annual property tax and homeowners insurance. The calculator then works out the largest monthly housing payment that fits the rule, subtracts taxes and insurance to find how much can go to principal and interest, and reverses the loan payment formula to find the biggest loan that payment supports. Add your down payment and you have your maximum home price. It is a quick, transparent way to set a realistic budget before you start house hunting or talking to a lender.
Method: the 28/36 rule. Your total monthly housing cost (principal, interest, taxes, and insurance) should be at most 28% of your gross monthly income, and your total monthly debts including housing should be at most 36% of your gross monthly income. We take the 28% housing maximum, subtract monthly property tax and insurance, and the remainder is the maximum principal and interest payment. The maximum loan is found by reversing the payment formula: loan = payment × (1 − (1 + r)−n) / r, where r is the monthly rate and n is the number of payments. Maximum home price = maximum loan + down payment.
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How to Use This Calculator
- Enter your gross annual income. Use your total pay before taxes, including salary and any steady bonuses or second income you can document.
- List your other monthly debts. Add up car payments, student loans, credit card minimums, and any other recurring debt. These debts tighten the 36% back-end limit.
- Enter your down payment, rate, term, taxes, and insurance. Your down payment adds directly to your maximum price, while taxes and insurance reduce the amount available for the loan payment itself.
- Click Calculate and check both ratios. Your maximum home price appears at the top. If your back-end ratio is over 36%, paying down a debt or choosing a cheaper home will bring it back inside the guideline.
Worked Example
Take a household earning $100,000 a year, with $500 a month in other debts, a $100,000 down payment, a 6.5% rate on a 30-year loan, $6,000 a year in property taxes, and $2,400 a year in homeowners insurance. Gross monthly income is $100,000 divided by 12, which is $8,333.33. The 28% rule caps housing costs at $2,333.33 a month. Taxes and insurance cost $700 a month ($8,400 a year divided by 12), so at most $1,633.33 a month can go to principal and interest. Reversing the payment formula at a monthly rate of 0.5417% over 360 payments, that $1,633.33 payment supports a maximum loan of $258,411.01. Add the $100,000 down payment and the maximum home price is $358,411.01. The front-end ratio sits exactly at 28%, and the back-end ratio is 34% ($2,333.33 of housing plus $500 of other debts, divided by $8,333.33 of income), comfortably inside the 36% limit. If the rate rose to 7.5%, the same payment would support a noticeably smaller loan, which is why locking in a good rate matters as much as the price of the house itself.
Frequently Asked Questions
What is the 28/36 rule for buying a house?
The 28/36 rule is a traditional lender guideline. It says your housing costs should be no more than 28 percent of your gross monthly income, and your total monthly debts, including housing, should be no more than 36 percent of your gross monthly income. Lenders today sometimes allow higher ratios, especially with a strong credit score, but the 28/36 rule remains a sensible, conservative target for staying comfortable with your payment.
Does this calculator include property taxes and insurance?
Yes. The 28 percent housing limit covers your full monthly housing cost, not just the loan payment. That means principal and interest, plus property taxes and homeowners insurance, and mortgage insurance if you put down less than 20 percent. This calculator subtracts your monthly tax and insurance costs from the housing maximum first, so the loan it suggests fits inside the real total payment.
How does my down payment change what I can afford?
Your down payment adds dollar for dollar to the home price you can afford, because the maximum home price equals the maximum loan plus your down payment. A larger down payment also lowers your monthly payment and can help you avoid private mortgage insurance. Saving a bigger down payment is one of the most direct ways to increase your buying power without increasing your monthly payment.
Why does a higher interest rate lower the home price I can afford?
A higher rate means more of each monthly payment goes to interest, so the same payment supports a smaller loan. For example, at 6.5 percent a $1,633 monthly principal and interest payment supports a loan of about $258,000, but at 8 percent that same payment would support roughly $222,000. Even a one-point change in rates can move your maximum home price by tens of thousands of dollars.
Is the result the same as what a bank will lend me?
Not necessarily. A bank looks at your credit score, employment history, savings, and other factors, and may approve you for more or less than the 28/36 rule suggests. This calculator gives you a responsible affordability estimate based on your income and debts, which is often lower than the maximum a lender would approve. Shopping within this estimate leaves room for maintenance, emergencies, and the rest of your life.