Home affordability calculator

How much house can I afford?

A common starting point: keep the total house payment at or below 28% of your gross monthly income, and all debt payments at or below 36%. On $100,000 a year with $500 of other debts, 6.5% for 30 years, $40,000 down, 1.1% property tax and $1,800 insurance, that is a home of about $336,600.

Where do the 28% and 36% come from?

The CFPB calls 28% of pre-tax income for the total home payment a lending rule of thumb, and suggests keeping all debts at 36% of income or less. Lenders may approve more or less.

What do lenders actually allow?

For Fannie Mae loans, the maximum total debt-to-income ratio is 36% when underwritten manually, up to 45% with the required credit score and reserves, and up to 50% through its automated system.

What is included in the house payment?

Principal, interest, property taxes and homeowner’s insurance (PITI), plus HOA dues. Mortgage insurance is not included here; with less than 20% down it adds to the payment.

Can I change the 28% and 36%?

Yes — enter the limits you want to use to see how the price changes.

Which limit applies, 28% or 36%?

Whichever gives the smaller monthly payment. The housing limit caps the house payment at a share of gross income. The total debt limit caps the house payment plus your other monthly debts, so it is the one that binds when you carry a car loan or student loans. The calculator shows which limit decided the result.

Why does a higher interest rate lower the price so much?

The monthly budget is fixed, so a higher rate leaves less of it for principal. In the example below, moving from 6.5% to 7.5% lowers the price by about $25,182, while the monthly payment stays at the limit.

What costs are missing from this estimate?

Mortgage insurance with less than 20% down, closing costs, maintenance and repairs, utilities and any rise in property tax or insurance. The payment limits here are about the loan payment, not about the cash you need on the day you close.

How the price is worked out

Your gross monthly income is the yearly figure divided by 12. The housing limit is that amount times the housing percentage. The debt limit is that amount times the total-debt percentage, minus your other monthly debt payments. The smaller of the two is the monthly budget for the whole house payment. Out of the budget come homeowner’s insurance (yearly premium ÷ 12) and HOA dues. The rest must cover principal and interest on the loan plus property tax, which is a percentage of the price. Because both depend on the price, the calculator solves for it directly: price = (budget − insurance − HOA + k × down payment) ÷ (k + tax rate ÷ 12), where k is the monthly principal and interest payment on one dollar borrowed at your rate and term. The loan is the price minus the down payment.

Worked example

Income $100,000 a year is $8,333 a month. The housing limit is 28% of that, $2,333. The debt limit is 36%, $3,000, minus $500 of other debts, $2,500. The smaller one, $2,333, is the budget (the housing limit decides). Insurance of $1,800 a year takes $150, leaving $2,183 for principal, interest and property tax. At 6.5% for 30 years with $40,000 down, that supports a price of about $336,610: a loan of $296,610 with principal and interest of $1,875 a month, and property tax of $309 a month.

Two variations on the same inputs. With $1,500 of other monthly debts the debt limit falls to $1,500, becomes the deciding limit, and the price drops to about $221,466. With the rate at 7.5% and the original debts, the price is about $311,427, which is $25,182 less.

Things to watch

• Use gross income, before taxes and deductions. The 28% and 36% guidelines are defined on pre-tax income, so entering take-home pay understates the result.
• List every monthly debt payment: car loans, student loans, minimum credit card payments and support payments. Fannie Mae counts installment debts lasting more than ten months and revolving debts in its debt-to-income ratio. Everyday costs such as utilities and groceries are not part of the ratio.
• Property tax and insurance vary a lot by place. Replace the defaults with figures for the area you are shopping in.
• A result that fits the guidelines is not a loan approval. Lenders also look at credit, reserves and the type of loan, and they may allow higher ratios (Fannie Mae permits up to 45% manually underwritten with the required credit and reserves, and up to 50% through its automated system).

Estimates for planning only — not financial advice. Your lender's figures decide. How we check our calculators.

Sources: Consumer Financial Protection Bureau, Your Home Loan Toolkit (28% rule of thumb) and debt-to-income guidance (36%); Fannie Mae Selling Guide B3-6-02, Debt-to-Income Ratios. Related tools: mortgage calculator, rent affordability calculator, down payment calculator.