Result
- Loan amount$384,321.95
- Down payment %13.5%
- Estimated PITI$3,000.00
- ↳ Principal & interest$2,492.70
- ↳ Property tax$407.30
- ↳ Insurance (est.)$100.00
- Max housing budget36% of income minus current debts$3,000.00
How to use this calculator
- Enter your gross (pre-tax) annual income and any monthly debts you already pay.
- Type your down payment and the current mortgage rate.
- Adjust the DTI cap if you want a more conservative answer (try 28%).
- See the max price plus the resulting PITI breakdown.
About this tool
How much house you can afford comes down to one ratio: your debt-to-income (DTI). Lenders usually want all your monthly debt — including the new mortgage — to stay under 36% of your gross monthly income, with hard caps around 43–50%. This calculator works backwards: given your income, existing debts, down payment, and the current rate, what's the largest home price that keeps you under that ceiling? It includes a realistic PITI estimate (taxes, insurance) instead of just the bare loan, so the answer matches what a lender will actually approve.
What this calculator does
Calculates the maximum home price you can afford given your income, down payment, existing debt, and prevailing mortgage rate. Applies the 28/36 debt-to-income rule (housing cost ≤ 28% of gross income, total debt ≤ 36%) and returns both the "healthy" affordable price and the "lender maximum" price.
How it works — the formula
Max housing = 0.28 × gross monthly income
Max debt payment = 0.36 × gross monthly income − other monthly debts
Max home price = amortization solve for principal given payment cap, rate, term28/36 rule is the traditional US mortgage underwriting standard. Housing cost includes principal, interest, property taxes, and homeowners insurance (PITI), plus PMI if down payment is under 20%.
Worked examples
- Inputs:
- gross income = $75,000/yr ($6,250/mo), down payment = $30,000, other debt = $300/mo, rate = 7%, term = 30 yrs, property tax rate = 1.2%
- Output:
- Max healthy home price ≈ $215,000; max lender-approved price ≈ $285,000
Healthy price fits within the 28/36 rule; lender-approved stretches to 43% DTI (the qualified-mortgage ceiling). The gap represents budget strain vs headroom.
- Inputs:
- gross income = $180,000/yr, down payment = $80,000, other debt = $600/mo, rate = 6.75%, term = 30 yrs
- Output:
- Max healthy home price ≈ $585,000; max lender-approved price ≈ $780,000
Dual-income with 20% down comfortably fits in the 28/36 band at $585K, avoiding PMI. Lender max stretches into strain territory.
The 28/36 rule and where it comes from
The 28/36 debt-to-income rule is the traditional mortgage underwriting standard used by conventional lenders. It has two components: the "front-end" ratio (housing cost divided by gross monthly income) must not exceed 28%, and the "back-end" ratio (housing cost plus all other monthly debt payments divided by gross monthly income) must not exceed 36%.
The rule was informally standardized in the 1970s-80s and codified into FHA and later Fannie Mae/Freddie Mac guidelines. It exists because homeowners spending more than 28% of gross income on housing statistically have much higher mortgage delinquency rates, and homeowners with total debt above 36% face acute financial stress in mild income shocks.
Modern qualified mortgages (post-2014 Dodd-Frank) allow back-end DTI up to 43%, and some lenders will underwrite even higher with compensating factors. The 28/36 rule is a HEALTHY ceiling; the 43% rule is a LENDING ceiling. Just because a lender approves you at 43% DTI does not mean you can comfortably afford that loan.
PITI — what actually goes into the monthly cost
Housing cost for affordability purposes is PITI: Principal, Interest, Taxes, Insurance. Principal + interest is the mortgage payment itself, calculated from the loan amount, rate, and term. Taxes are property taxes divided by 12. Insurance is homeowners insurance divided by 12. Add PMI when down payment is under 20% on conventional loans.
Property taxes vary enormously. The lowest US rates are in Hawaii (0.28%), Alabama (0.41%), Louisiana (0.55%). The highest are in New Jersey (2.49%), Illinois (2.27%), New Hampshire (2.18%). On a $400,000 home, this ranges from $1,120/year in Hawaii to $9,960/year in New Jersey — a difference of $737/month in the PITI calculation.
Homeowners insurance similarly varies by state and hazard exposure. Basic coverage runs $800-2,000/year in most states; hurricane-exposed Florida coasts run $3,000-8,000; wildfire-prone California zones run $2,500-6,000. Get an actual quote for the specific property before finalizing affordability.
Down payment strategy — the 20% question
Twenty percent down eliminates private mortgage insurance on conventional loans and typically qualifies for the lender's best rates. It also demonstrates savings discipline that supports underwriting.
But 20% is not always optimal. If home prices are appreciating faster than you can save the incremental down payment, waiting to hit 20% can be more expensive than buying sooner with less down. In a market appreciating 5%/year, waiting 3 years to save an extra 10% down means paying about 15.7% more for the equivalent home.
FHA loans (3.5% down) and conventional low-down-payment loans (3-5% down) both work but carry cost trade-offs. FHA requires MIP for the loan's life regardless of equity; conventional PMI cancels once loan-to-value hits 80%. Do the specific-scenario math rather than defaulting to 20%.
The hidden costs of homeownership
PITI alone understates the true cost of homeownership. Add ~1-3% of home value annually for maintenance and repairs (roof replacement every 20-25 years, HVAC every 15-20 years, minor repairs continuously), 0.5-1% for utilities delta between renting and owning, and lump-sum transaction costs (~6-10% of home value) at eventual sale.
On a $400,000 home, the annual "hidden" costs beyond PITI easily reach $6,000-14,000/year. Over a typical 7-year ownership period, transaction costs at sale run another $24,000-40,000. These are real and often make homeownership more expensive than renting the equivalent property in the first 5-7 years.
The break-even period varies by market. In fast-appreciating markets (Austin, Nashville, Phoenix in 2020-2022) homeownership frequently pays off within 3-4 years. In slow-growth or declining markets, break-even can be 10+ years.
How much can I afford vs how much should I spend
The affordability calculator answers "how much CAN I afford?" — the maximum loan and price you would qualify for given income and debt. The healthier question is often "how much SHOULD I spend?" — the amount that leaves comfortable margin for savings, retirement, and life goals beyond housing.
A useful discipline: aim for the 28% front-end ratio to leave 8 percentage points of headroom below the 36% back-end. That headroom absorbs the "hidden costs" (maintenance, utility bumps, unexpected repairs) that PITI does not capture. It also leaves budget space for retirement savings, kids' education funds, and emergency fund maintenance.
A homeowner spending 35% of gross on housing is not "wrong" — it just has very little room for anything else. If retirement, education, or emergency savings feel perpetually squeezed, housing cost is usually the biggest lever available to unstick them.
Limitations
- Does not model HOA fees, condo fees, or Mello-Roos (California) special assessments which can significantly change monthly housing cost.
- Assumes 20% down avoids PMI (true for conventional loans; FHA requires MIP regardless of down payment).
- Property tax rate varies enormously by state and locality (0.3% in Hawaii, 2.5% in New Jersey) — use your specific rate.
- Ignores property appreciation, home maintenance costs (~1-3% of home value annually), and transaction costs at eventual sale (~6-10%).
Affordability figures are planning estimates. This calculator does not provide mortgage or lending advice — every lender applies its own underwriting overlays beyond the 28/36 baseline.