Home Affordability Calculator

The number lenders will approve and the number you should actually spend are often different. I built this calculator to find the number you can comfortably afford, not just the maximum a bank will give you. Being approved for $500,000 doesn't mean $500,000 is wise.

The 28/36 rule explained

The 28/36 rule is the standard guideline lenders use to assess affordability. The front-end ratio (28%) limits your total housing payment, principal, interest, property taxes, and insurance (PITI), to 28% of gross monthly income. The back-end ratio (36%) limits all debt payments combined, housing plus car loans, student loans, credit card minimums, to 36% of gross monthly income. Your actual maximum is whichever constraint is more binding.

What lenders actually approve

Many lenders today approve loans at DTI ratios up to 43–50%, especially with strong credit scores and down payments. This means you may qualify for significantly more than this calculator suggests. That is not necessarily a reason to borrow more. A 43% DTI leaves very little financial flexibility, one unexpected expense can create a cash flow crisis. The 28/36 thresholds produce a more comfortable, sustainable payment.

Down payment and its compounding effects

A larger down payment reduces the loan amount (lower payment), may eliminate PMI (saves $100–300/month), often qualifies you for a better interest rate, and reduces total interest paid. The 20% threshold for PMI elimination is significant, on a $400,000 home, PMI can add $150–250/month to your payment. Building to 20% down before buying is worth the additional saving time for most buyers.

Hidden costs of homeownership

This calculator covers principal, interest, taxes, and insurance, the standard PITI components. But total homeownership cost also includes maintenance (budget 1–2% of home value annually), HOA fees where applicable, utilities that may differ from renting, and closing costs (typically 2–5% of the purchase price). A $400,000 home should budget $4,000–$8,000 per year for maintenance alone, roughly $333–$667/month that doesn't show up in mortgage calculations.

Interest rate sensitivity

A 1% change in interest rate changes your monthly payment on a $300,000 30-year loan by roughly $175/month, and changes total interest paid over the life of the loan by over $60,000. Run this calculator at different rate scenarios to understand how much rate matters for your specific loan size. Shopping multiple lenders and improving your credit score before applying are the most impactful ways to reduce your rate.

Frequently asked questions

Should I buy at the maximum I can afford?

Rarely. Buying at the maximum approval amount leaves no financial buffer for job changes, unexpected expenses, or interest rate increases if you have an adjustable rate. Most financial planners suggest targeting 20–25% of gross income for housing costs rather than the 28% ceiling, especially if you have other financial goals like retirement saving or debt payoff.

How does my credit score affect what I can afford?

Credit score primarily affects the interest rate you're offered, which significantly impacts your monthly payment and how much you can borrow at a given payment ceiling. A score above 760 typically qualifies for the best available rates. Each 20-point drop in score can increase your rate by 0.25–0.5%, which meaningfully reduces the home price you can afford at a given payment ceiling.

What if I'm self-employed?

Self-employed borrowers typically use 2-year average net income from tax returns (after business deductions). If you write off significant business expenses, your qualifying income may be lower than your gross revenue. Some lenders offer bank statement loans that use deposit history instead of tax returns, often at higher rates.