Home Affordability Calculator
Estimate your maximum purchase price based on your income and debts.
Estimated Max Home Price
Estimated Monthly Payment:
Calculated using a 36% Debt-to-Income (DTI) ratio limit.
How Much House Can I Afford?
Determining your home buying budget is the most critical step in the real estate journey. While a bank might pre-approve you for a high amount, understanding the math behind affordability ensures you don't become "house poor."
The 28/36 Rule Explained
Lenders typically use the 28/36 rule to determine your borrowing capacity:
- 28% Limit: Your total monthly housing costs (mortgage, taxes, and insurance) should not exceed 28% of your gross monthly income.
- 36% Limit: Your total debt obligations (housing plus car loans, student loans, and credit cards) should not exceed 36% of your gross monthly income.
Key Factors Impacting Affordability
1. Gross Income: Your total earnings before taxes are the foundation of your mortgage eligibility.
2. Debt-to-Income (DTI) Ratio: High existing debts reduce the amount a lender will give you for a mortgage.
3. Down Payment: The more you put down, the lower your monthly payment and interest costs will be.
4. Interest Rates: Even a 1% difference in interest rates can swing your buying power by tens of thousands of dollars.
Example Scenario
If a household earns $100,000 annually ($8,333/month) and has $400 in monthly car payments, the 36% rule allows for a total debt of $3,000. Subtracting the $400 car payment leaves $2,600 available for the monthly mortgage, taxes, and insurance.