How much house can I afford? How the calculator works
Lenders look at two numbers: how much of your gross monthly income goes to housing, and how much goes to all your debts together. The calculator turns both limits into a monthly housing budget and takes the smaller one. Then it searches for the highest home price whose full monthly payment fits that budget: principal and interest on the mortgage, property tax, home insurance, HOA fees and PMI when you put down less than 20 percent.
Here is what the same assumptions give at a few incomes: $500 a month in other debt payments, 20 percent down, a 6.5 percent 30-year mortgage, 1.1 percent property tax and $1,800 a year for insurance. Prices are rounded to the nearest thousand.
| Gross income | At 28/36 | At 31/43 |
|---|---|---|
| $50,000 / yr | $142,000 | $191,000 |
| $75,000 / yr | $268,000 | $299,000 |
| $100,000 / yr | $366,000 | $407,000 |
| $150,000 / yr | $561,000 | $624,000 |
The debt to income ratio, explained
Your debt to income ratio (DTI) compares monthly payments with gross monthly income. The front-end ratio counts only the housing payment. The back-end ratio counts housing plus every other debt payment, like a car loan, student loans and minimum credit card payments.
- 28/36 is the classic conservative guideline: housing up to 28 percent of gross income, all debts up to 36 percent.
- 31/43 matches the standard FHA guideline, and 43 percent was long the usual ceiling for a qualified mortgage. Treat it as close to the most a typical lender will approve.
- Some programs go higher, with strong credit or savings. That a lender allows it does not mean your budget does.
When your other debts are high, the back-end ratio becomes the limit. Paying off a car loan can raise the price you qualify for more than a raise would.
Why the lender's maximum is not the same as comfortable
Debt to income ratios use income before taxes, retirement contributions and health insurance. A payment that is 31 percent of gross pay can easily be 40 percent or more of what you take home. The lender also does not see your childcare, commute, savings goals or the repairs every home needs.
A simple check: enter your monthly take-home pay, and the calculator shows the price where housing costs about 25 percent of it. Many people feel comfortable somewhere between that price and the 28/36 price. If the 31/43 price is the only one that works, the home is likely to stretch your budget.
Closing costs and cash you need on top
The down payment is not the only cash you need at closing. Closing costs for the loan, title, appraisal and prepaid taxes and insurance often add roughly 2 to 5 percent of the price, depending on where you buy. Plan for moving costs and first repairs too, and keep an emergency fund after you buy. A lender may also want to see a few months of payments in reserve.
How to use the home affordability calculator
- 1Enter your gross income per year or per month, your monthly debt payments and your down payment as a percentage or an amount.
- 2Set the mortgage rate and term, pick the 28/36 or 31/43 limit or your own, and adjust property tax, insurance, HOA and PMI for the area you are looking at.
- 3Read the maximum price, which limit holds you back and the payment behind it. Add your take-home pay for a comfortable price, then copy the result or share a link.
Frequently asked questions
What is the 28/36 rule?
A traditional lending guideline: your full housing payment (principal, interest, property tax, insurance, PMI and HOA) should stay under 28 percent of your gross monthly income, and all your debt payments together, housing included, under 36 percent. With $7,500 a month before taxes that is up to $2,100 for housing and $2,700 for all debts.
Should I use gross income or take-home pay?
Lenders use gross income, before taxes and deductions, so the limits in this calculator do too. Your budget runs on take-home pay, though. Enter your monthly take-home pay as well to see a price where housing is about 25 percent of what actually lands in your account.
What counts as monthly debt payments?
Payments that show up on your credit report or that you owe by law: car loans, student loans, minimum credit card payments, personal loans, child support and alimony. Your current rent, utilities, phone and groceries do not count, because the new home payment replaces the rent.
How does the down payment change what I can afford?
A bigger down payment means a smaller loan for the same price, so the same monthly budget buys more house. Putting down at least 20 percent also removes private mortgage insurance on a conventional loan. Remember that the down payment is not your only cash need: closing costs and a cash cushion come on top.
Is this the same as a pre-approval?
No. It is an estimate from the numbers you enter. A lender also looks at your credit score, savings, job history and the exact loan program, and real taxes and insurance depend on the home. Use it to set a price range before you talk to a lender, not as financial advice.