Mortgage Affordability Calculator

"How much house can I afford?" is really two questions: how much will a lender approve, and what payment leaves your budget intact? This calculator answers the lender's version precisely — applying the standard front-end housing ratio and back-end debt-to-income (DTI) limits, subtracting taxes, insurance and HOA dues, and converting what remains into a maximum loan and home price. It then stress-tests the result at a rate 2 points higher and shows how your price ceiling moves across five rate scenarios.

How It Works

1. Income. Your annual income plus any partner and other income you enter, divided by 12 for gross monthly income.
2. Two caps on the housing payment. The front-end cap is monthly income times the housing ratio — 28% by default. The back-end cap is monthly income times the total DTI limit — 43% by default — minus your existing monthly debts. Itemized debts (car loan, student loan, credit card, other) override the single monthly-debts figure whenever they are provided. The lower of the two caps governs.
3. From payment to loan. Monthly property tax (annual ÷ 12 unless you enter it monthly), insurance (annual ÷ 12) and HOA dues are subtracted from the capped payment. What remains services principal and interest, and is converted into the largest loan it supports at your rate and term.
4. Home price and diagnostics. Add your down payment for the maximum home price. The tool reports your resulting front-end and back-end DTIs, a stress test — the payment on that loan at your rate plus 2%, checked against your back-end cap — and a scenario table at your rate −1, +0, +1, +2 and +3 points.

The Formulas

$\text{Max Housing Payment} = \min\bigl(\text{Income} \times 28\%,\ \text{Income} \times 43\% - \text{Debts}\bigr)$

$\text{Max Loan} = (\text{Max Housing} - \text{Tax} - \text{Insurance} - \text{HOA}) \times \frac{(1 + r)^{n} - 1}{r(1 + r)^{n}}$

Input Parameters

| Parameter | Unit | Description | |---|---|---| | Annual Income (+ partner / other) | Currency | Gross household income before tax. | | Monthly Debts | Currency / month | Combined minimum payments — or itemize car, student, card and other debts instead. | | Down Payment | Currency | Cash available toward the purchase. | | Interest Rate / Term | % / Years | Expected mortgage rate and length (typically 30). | | Property Tax / Insurance | Currency / year | Annual estimates for the target area and home. | | Monthly HOA | Currency / month | Association dues, if any. | | Target DTI / Housing Ratio | % | Optional overrides; defaults are 43% and 28%. |

Worked Example

Household income is $120,000, existing debts are$500 a month, the down payment is $50,000, and you assume a 30-year loan at 6.5$4,800 a year in property tax, $1,200 a year in insurance and no HOA.

• Gross monthly income: $10,000. Front-end cap: 28$10,000 = $2,800**. Back-end cap: 43$10,000 − $500 = **$3,800. The housing ratio governs: $2,800.
• Less tax ($400) and insurance ($100): $2,300 a month available for principal and interest.
• That payment supports a maximum loan of $363,884.88** at 6.5$413,884.88 with the down payment.
• Your ratios at that price: front-end 28.00%, back-end 33.00%.
• Stress test: at 8.5%, the payment on that loan rises to $2,797.96 a month; total outgoings including tax, insurance and existing debts reach$3,797.96, still within the $4,300 back-end cap — the purchase remains affordable under the stress check.
• Rate scenarios: at 5.5% the same budget supports a $405,080.06 loan ($455,080.06 home); at 9.5%, only $273,531.37 ($323,531.37 home). Across that scenario range, your price ceiling swings by roughly $132,000.

Interpreting the Results

• Whichever cap binds tells you your lever. Here the 28% housing ratio binds, so cutting debts would not raise the ceiling — only more income, a bigger ratio target, or a lower rate would. When the back-end cap binds instead, paying down a car loan before applying directly buys more house.
• The scenario table is a timing tool. It quantifies what waiting for lower rates is worth — and what rising rates cost — in price terms.
• "Affordable" here means lender-approvable, not comfortable. The 28/43 defaults are qualifying limits, not a household budget.

Affordability Beyond the Ratios

Approval math ignores childcare, commuting, maintenance (budget roughly 1% of the price per year), and the closing costs of 2–5% that sit on top of your down payment. It also ignores PMI: below 20% down, most lenders add private mortgage insurance, which this tool does not model — if that will apply to you, add a monthly estimate to the HOA field to keep the ceiling honest.

Limitations

• Gross income, standard ratios. Lenders verify income, may use different ratio limits by loan program (FHA, VA and conventional all differ), and can count debts differently — student loans especially.
• Taxes and insurance are your estimates for a home you have not chosen yet; both vary widely by locality and will move the ceiling.
• The stress test checks one shock — a 2-point rate rise — against the back-end cap only; job loss and expense shocks are yours to model.

Frequently Asked Questions

Why are the default limits 28% and 43%, not the classic 28/36?

The tool's defaults pair the traditional 28% front-end ratio with a 43% back-end DTI — the ceiling long used for qualified mortgages in the US. The stricter 36% back-end figure is a conservative guideline from an earlier era. Both targets are editable: if you want the classic rule, set the target DTI to 36%.

Why did my itemized debts replace the monthly debts figure?

When any itemized debt fields (car, student, credit card, other) are provided, the tool uses their sum instead of the single monthly-debts entry — it assumes the breakdown is the more accurate picture. Enter one or the other, not both.

Does a bigger down payment raise my maximum price one-for-one?

Yes — the maximum home price is the maximum loan plus your down payment, so every extra dollar saved adds a dollar of price ceiling. It can also help indirectly by removing PMI, though that effect is outside this model.