Why does this calculator use 28/36 DTI ratios?

The 28/36 guidelines are long-standing rules of thumb in mortgage underwriting. They are not hard limits for every lender or program, but they provide a conservative starting point that helps you avoid stretching too far. Many modern loans allow higher DTIs, but those higher limits can leave less room for unexpected expenses.

Should I include HOA dues and PMI in the taxes/insurance field?

Yes—if you know or expect HOA dues, mortgage insurance, or other recurring housing costs, add them into the taxes/insurance input. Lenders typically look at the full monthly housing obligation, not just principal and interest, when applying DTI rules.

Does this tell me exactly what a lender will approve?

No. It’s a modeling tool, not an underwriting engine. Lenders also consider credit history, cash reserves, property type, loan program, and many other factors. Treat the output as an educated estimate to guide your search, then get a formal pre-approval for precise numbers.

What if mortgage rates change before I buy?

Rates can move significantly over time, so it’s smart to re-run the calculation with updated rates as you get closer to making offers. Higher rates reduce the loan amount a given payment can support, which lowers your maximum home price, and vice versa.

Is it wise to buy at the maximum price this calculator shows?

That depends on your risk tolerance and goals. Many buyers prefer to stay below the theoretical maximum so they have room in their budget for savings, maintenance, and lifestyle spending. Consider using the result as an upper bound and choosing a comfortable target below it.

finance calculator

Home Affordability Calculator

Estimate how much house you can afford based on income, debts, down payment, and estimated taxes/insurance.

Results

Estimated max home price: $487,237 USD
Max mortgage amount: $389,789 USD

Overview

This home affordability calculator uses common debt-to-income (DTI) guidelines to estimate a rough maximum home price and mortgage amount you might be able to handle. It looks at your income, existing monthly debts, estimated property taxes and insurance, rate, and term to show a conservative range before you start talking with lenders or touring houses.

How to use this calculator

Enter your total household annual income before taxes, covering all borrowers on the loan.
Add up your recurring monthly debts (auto, student loans, minimum credit card payments, personal loans, etc.) and enter that amount.
Enter your expected down payment percentage, a realistic mortgage APR, loan term, and estimated monthly property taxes and insurance for the area you’re targeting.
Review the estimated maximum mortgage amount and home price based on 28/36 DTI rules, and treat the result as a conservative ceiling rather than a target you must reach.
Experiment by increasing your down payment, reducing debts, or testing different rates and tax/insurance assumptions to see how each change shifts your affordability range.

Inputs explained

Household annual income: Your gross (pre-tax) annual income for everyone applying for the loan. Include salary, consistent bonuses, and other income that lenders are likely to count. If your income is variable, consider using a conservative average or your lower, guaranteed base pay.
Monthly debt payments: Total of recurring monthly obligations that will still be in place after you buy the home: auto loans or leases, student loans, personal loans, minimum credit card payments, and child support or alimony. Do not include your future mortgage payment here—the calculator accounts for it separately.
Down payment %: The percentage of the purchase price you plan to pay upfront from savings, gifts, or sale proceeds. Common values range from 3–5% for low-down-payment loans to 20% or more to avoid private mortgage insurance (PMI). A higher down payment lowers your loan amount and often improves affordability and loan options.
Mortgage APR: The annual interest rate you expect on the mortgage. Use a rate that matches current quotes for your credit profile and loan type. Because the calculator uses a fixed-rate amortization model, it assumes the rate stays the same over the life of the loan.
Taxes + insurance (monthly): Your best estimate of monthly property taxes and homeowners insurance for the type of home and area you are considering. You can get rough numbers from online listings, county tax sites, or an insurance quote. If you expect HOA dues or PMI, add them here to get a more complete monthly housing cost.
Loan term: The length of the mortgage in years, such as 30 or 15. Longer terms reduce the monthly payment for a given loan amount but increase total interest paid over time; shorter terms do the opposite.

Outputs explained

Estimated max home price: A rough upper bound on the purchase price the 28/36 DTI rules would support, given your income, debts, down payment percentage, and estimated taxes and insurance. It assumes your actual offer price ends up at or below this number.
Max mortgage amount: The maximum loan size implied by your affordable principal-and-interest payment. This figure reflects the loan portion only, before down payment, and approximates what a conservative DTI-based model might allow.

How it works

Lenders often rely on front-end and back-end DTI guidelines when sizing a mortgage. The front-end ratio compares just your housing payment (principal, interest, taxes, and insurance—PITI) to gross monthly income. A typical rule of thumb is that PITI should be around 28% or less of gross income.

The back-end ratio compares total monthly debt payments—including PITI plus recurring debts like credit cards, auto loans, and student loans—to gross monthly income. A classic guideline is that total debt should be roughly 36% or less of gross income, though real programs may allow higher numbers.

This calculator converts your annual income to gross monthly income, then applies the 28% front-end and 36% back-end DTI targets to find two maximum PITI budgets: one constrained by housing alone and one constrained by housing plus other debts.

It subtracts your estimated monthly property taxes and homeowners insurance from these PITI budgets to isolate the maximum principal-and-interest mortgage payment the DTI rules would support.

Using the standard mortgage payment formula, the tool then solves for the corresponding maximum loan amount based on your chosen interest rate and term length.

Finally it uses your down payment percentage to gross up the maximum loan amount into an estimated maximum home price: Home price ≈ Loan amount ÷ (1 − Down payment %). The more you put down, the higher the home price you can afford for the same monthly payment.

Formula

Gross monthly income = Annual income ÷ 12
Front-end PITI limit ≈ Gross monthly income × 0.28
Back-end total debt limit ≈ Gross monthly income × 0.36
Max PITI from back-end = Back-end limit − Existing monthly debts
Max PITI budget = min(Front-end PITI limit, Max PITI from back-end)
Max principal & interest payment = Max PITI budget − Taxes/insurance
Mortgage amount solved from standard loan payment formula using payment, APR, and term
Estimated max home price = Mortgage amount ÷ (1 − Down payment %)

When to use it

Sizing a target pre-approval range before meeting with lenders or attending open houses so you focus on homes that roughly match what your income and debts can support.
Seeing how paying off a car loan, reducing credit card balances, or consolidating debt would improve your back-end DTI and raise your estimated affordability.
Testing how different down payment percentages change your maximum price—useful when deciding whether to wait and save more or move forward with a smaller down payment.
Modeling the impact of higher property taxes, HOA dues, or insurance in specific neighborhoods or buildings to avoid surprises once you receive actual quotes.
Comparing the affordability difference between a 30-year and a 15-year term, or between current rates and a potential future rate if you expect the market to move.

Tips & cautions

Be conservative with your inputs: use a slightly lower income and slightly higher debt and tax/insurance estimates than the rosiest scenario. This builds a safety margin for unexpected expenses and rate changes.
Remember that DTI is only one factor lenders use. Credit score, savings, job history, and loan program also matter. Staying below the calculator’s estimate may still be wise even if a lender would approve you for more.
Include HOA dues, PMI, and any known recurring housing fees in the taxes/insurance field to get a more realistic monthly housing payment estimate.
Use this tool as a starting point, then have a lender run their own pre-approval numbers based on actual underwriting guidelines for your situation.
Revisit the calculation if your debts change, you get a raise, or you shift your target neighborhoods, since taxes and insurance can vary significantly by location.
DTI thresholds vary by lender, program, credit score, and loan type. Some loans allow much higher back-end DTIs than the classic 36% rule; this calculator sticks to traditional guidelines for a conservative estimate.
Does not explicitly model PMI, HOA dues, or other housing costs unless you manually include them in the taxes/insurance input.
Assumes a fixed-rate, fully amortizing mortgage with level payments; adjustable-rate mortgages (ARMs), interest-only loans, and other structures behave differently over time.
Ignores future changes in income, taxes, and insurance. In reality, your earnings, property assessments, and insurance premiums may rise or fall over the life of the loan.
This is not a credit decision or guarantee of approval; only a lender applying full underwriting criteria can tell you what you actually qualify for.

Worked examples

$120k income, $800 debts, 20% down, 6.25% rate, $400/mo taxes/insurance, 30-year term

Gross monthly income = $120,000 ÷ 12 = $10,000.
Front-end PITI limit ≈ 28% of $10,000 = $2,800.
Back-end total debt limit ≈ 36% of $10,000 = $3,600.
Max PITI from back-end = $3,600 − $800 existing debts = $2,800, so both front-end and back-end suggest a PITI budget of about $2,800.
Max principal & interest payment = $2,800 − $400 taxes/insurance = $2,400.
With a 6.25% APR and 30-year term, a $2,400 monthly payment supports a loan amount in the mid-$380,000s (solved with the amortization formula).
With 20% down, estimated max home price ≈ $380,000 ÷ 0.80 ≈ $475,000.

$90k income, $1,200 debts, 10% down, 6.75% rate, $500/mo taxes/insurance, 30-year term

Gross monthly income = $90,000 ÷ 12 = $7,500.
Front-end PITI limit ≈ 28% of $7,500 = $2,100.
Back-end total debt limit ≈ 36% of $7,500 = $2,700.
Max PITI from back-end = $2,700 − $1,200 debts = $1,500, so the back-end ratio becomes the binding constraint.
Max principal & interest payment = $1,500 − $500 taxes/insurance = $1,000.
At 6.75% over 30 years, a $1,000 payment corresponds to a loan amount in the low-$150,000s.
With 10% down, estimated max home price ≈ Loan ÷ 0.90, yielding a price in the mid-$170,000s.

Impact of paying off a $400/month car loan before buying

Start from the second scenario but assume you pay off a $400/month car loan, reducing monthly debts from $1,200 to $800.
Back-end total debt limit remains ≈ $2,700, but Max PITI from back-end becomes $2,700 − $800 = $1,900 instead of $1,500.
With taxes/insurance at $500, max principal & interest payment rises from $1,000 to $1,400.
That higher payment supports a much larger loan amount, which directly translates into a higher estimated max home price—showing how eliminating a single large debt can meaningfully boost affordability.

Deep dive

This home affordability calculator applies classic 28/36 debt-to-income rules to estimate a conservative maximum mortgage amount and home price based on your income, monthly debts, down payment percentage, interest rate, and estimated property taxes and insurance.

Enter your numbers to see how much house might fit comfortably within traditional lending guidelines, then test scenarios like paying off a car, increasing your down payment, or shopping in areas with lower property taxes to see how affordability shifts.

Use the results as a starting point for conversations with lenders and agents—not as a hard target—and aim to choose a home price that keeps your monthly payment well inside your comfort zone rather than at the absolute maximum of what you could qualify for.

FAQs

Why does this calculator use 28/36 DTI ratios?: The 28/36 guidelines are long-standing rules of thumb in mortgage underwriting. They are not hard limits for every lender or program, but they provide a conservative starting point that helps you avoid stretching too far. Many modern loans allow higher DTIs, but those higher limits can leave less room for unexpected expenses.
Should I include HOA dues and PMI in the taxes/insurance field?: Yes—if you know or expect HOA dues, mortgage insurance, or other recurring housing costs, add them into the taxes/insurance input. Lenders typically look at the full monthly housing obligation, not just principal and interest, when applying DTI rules.
Does this tell me exactly what a lender will approve?: No. It’s a modeling tool, not an underwriting engine. Lenders also consider credit history, cash reserves, property type, loan program, and many other factors. Treat the output as an educated estimate to guide your search, then get a formal pre-approval for precise numbers.
What if mortgage rates change before I buy?: Rates can move significantly over time, so it’s smart to re-run the calculation with updated rates as you get closer to making offers. Higher rates reduce the loan amount a given payment can support, which lowers your maximum home price, and vice versa.
Is it wise to buy at the maximum price this calculator shows?: That depends on your risk tolerance and goals. Many buyers prefer to stay below the theoretical maximum so they have room in their budget for savings, maintenance, and lifestyle spending. Consider using the result as an upper bound and choosing a comfortable target below it.

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This home affordability calculator is for educational purposes only. It uses simplified debt-to-income guidelines and assumes fixed rates, stable income, and user-supplied estimates for taxes, insurance, and other costs. It does not constitute mortgage advice, a pre-approval, or a commitment to lend. Always review options with qualified lenders and financial professionals before making home-buying decisions.