💰 Home Affordability Calculator
Discover how much house you can afford based on your income, monthly debts, and down payment using the industry-standard 28/36 rule.
Why Use This Calculator?
Calculate Maximum Home Price with 28/36 Rule
$8,000 monthly gross income: 28% housing ratio = $2,240 max housing payment, 36% total debt = $2,880 max all debts. With $500 existing debt: $2,880 - $500 = $2,380 available for housing. Lower of $2,240 (28%) and $2,380 (36% - debts) = $2,240 max payment. At 6.5% for 30 years: affords $353,000 home with 20% down. Calculator shows exact qualification.
Factor All Monthly Housing Costs Accurately
$2,240 max payment includes: P&I + property tax + insurance + HOA + PMI. Not just mortgage. $2,240 - $400 tax - $150 insurance - $200 HOA = $1,490 available for P&I. $1,490 @ 6.5% = $237,000 loan (affords $296,250 home with 20% down, not $353k). Including all costs reveals true affordability = prevents overbuying.
See Impact of Existing Debt on Home Budget
$8k income, 36% rule = $2,880 total debt capacity. With $600 debts (car $350 + credit card $250): only $2,280 left for housing (vs $2,880 with no debts). $600/month debt reduces home affordability by $95,000 (from $400k to $305k). Pay off $15k credit card before buying = afford $50k more home. Calculator quantifies debt impact.
Model Different Down Payment Scenarios
$8k income affords $2,240 housing. With 20% down: $353,000 home (no PMI). With 10% down: $310,000 home ($2,240 - $175 PMI = $2,065 for P&I+PITI). With 3.5% FHA: $275,000 home ($2,240 - $250 PMI - $50 MIP = $1,940). Lower down payment = need lower price to stay in budget. Calculator shows trade-offs.
Adjust for Property Tax and Insurance Variations
Texas property tax 2.5% vs California 1%: $400k home = $833/month TX vs $333/month CA ($500 difference). Same $8k income affords $400k in CA but only $320k in TX due to higher tax. Florida no state income tax but high insurance $250/month vs Midwest $100. Location dramatically affects affordability - calculator accounts for local costs.
Plan for Income Changes and Job Security
$8k income now, expecting $10k in 2 years (promotion): Qualify for $353k now (28% of $8k) or wait for $441k (28% of $10k). Buying max now = stretched budget 2 years. Buying $300k now = comfortable. Dual income $16k total but spouse might quit = qualify on one income only ($8k) for safety. Calculator models income scenarios.
Step-by-Step Guide
Calculate Gross Monthly Income
$96,000 annual salary ÷ 12 = $8,000 monthly gross. Use pre-tax income, not take-home. Include salary, bonuses (average last 2 years), commissions, rental income, alimony. Hourly: $45/hour × 40 hours × 4.33 weeks = $7,794/month. Self-employed: average last 2 years after business expenses. Lenders verify with tax returns and paystubs.
Example:
Example: $75k salary + $15k annual bonus = $90k ÷ 12 = $7,500 monthly gross
Apply 28% Front-End Ratio (Housing Only)
$8,000 income × 28% = $2,240 maximum monthly housing payment. Includes PITI (principal, interest, taxes, insurance) + HOA + PMI. Conservative lenders use 28%, aggressive up to 31%. FHA allows 31% front-end. This is first constraint on affordability. Cannot exceed regardless of other debts.
Example:
Example: $10,000 income × 28% = $2,800 max total housing payment
Apply 36% Back-End Ratio (All Debts)
$8,000 income × 36% = $2,880 maximum for ALL monthly debts (housing + car + student loans + credit cards + personal loans). Existing debts $600/month: $2,880 - $600 = $2,280 available for housing. This becomes limiting factor if debts are high. FHA allows 43% back-end, conventional 43-50% with compensating factors.
Example:
Example: $9,000 × 36% = $3,240 total - $800 debts = $2,440 for housing
Subtract Non-Mortgage Housing Costs
$2,240 max payment - property tax (estimate 1.5% ÷ 12) - insurance ($150 typical) - HOA ($200 if applicable) - PMI (if under 20% down) = amount left for principal + interest. $2,240 - $500 tax - $150 insurance - $200 HOA = $1,390 for P&I. This determines loan amount you can afford.
Example:
Example: $2,500 max - $450 tax - $175 insurance - $0 HOA = $1,875 for P&I
Calculate Maximum Loan Amount from P&I Budget
$1,390 available for P&I @ 6.5% rate for 30 years. Use mortgage formula or calculator: $1,390/month payment = $219,700 maximum loan. With 20% down: $219,700 ÷ 0.80 = $274,625 maximum home price. With 10% down: $219,700 ÷ 0.90 = $244,111 (but need to subtract PMI first, recalculate).
Example:
Example: $2,000 P&I @ 7% for 30y = $300,433 loan = $375,541 home (20% down)
Factor Down Payment Amount Available
Have $60,000 for down payment + closing costs. Closing costs ~3% of price. Targeting $300k home: need $60k down (20%) + $9k closing = $69k (short $9k). Either: buy $285k home ($57k down + $8.5k closing = $65.5k, have cushion), or put 15% down on $300k ($45k + $9k = $54k, have $6k left, pay PMI $150/month).
Example:
Example: $50k saved: $400k home needs $80k down + $12k closing = $92k (not affordable)
Adjust for PMI on Down Payments Under 20%
10% down on $300k = $270k loan. PMI 0.85% annually = $2,295/year = $191/month. $2,240 max payment - $191 PMI - $375 tax - $150 insurance = $1,524 for P&I (vs $1,890 with 20% down). $1,524 @ 6.5% = $241,600 loan = $268,444 home with 10% down vs $299,000 with 20% down. PMI reduces affordability $30,556.
Example:
Example: 5% down adds $250 PMI = reduces affordability by $39,600 at 6.5%
Account for Credit Score Impact on Rate
$8k income qualifies for $353k home @ 6.5% rate (740+ score). 680 score = 7.2% rate = same payment only affords $318,000 home ($35k less). 620 score = 8.5% rate = $270,000 home ($83k less). Credit score difference of 120 points = $83k affordability difference. Improve score 6 months before buying = afford more home.
Example:
Example: 760 score @ 6.25% affords $365k, 690 score @ 7.5% affords $312k
Compare Conventional vs FHA Qualification
$8k income: Conventional 28/36 = $2,240/$2,880. FHA 31/43 = $2,480/$3,440. With $400 debts: Conventional allows $2,240 housing (limiting), FHA allows $2,480 housing. FHA qualifies for $50k more home. But FHA has upfront MIP 1.75% + annual 0.55% = may cost more long-term. Use FHA if need looser ratios, conventional if qualify for both.
Example:
Example: $7k income, $600 debts: Conventional $1,920 housing, FHA $2,170 housing
Model Future Income Growth Scenarios
$8k now, raise to $10k in 1 year guaranteed. Buy now @ $8k = $353k max (stretched budget). Wait 1 year @ $10k = $441k max (28% of $10k) = $88k more buying power. But home prices might rise 5% ($353k → $371k) + another year of rent ($26.4k). Waiting costs $44k opportunity. If confident in raise, buying now might be better despite tighter budget.
Example:
Example: $90k salary → $110k (promotion) = buying power $362k → $442k (+$80k)
Expert Tips & Strategies
Use 25% Rule, Not 28%, for Comfortable Budget
$8k income × 28% = $2,240 (bank maximum). $8k × 25% = $2,000 (comfortable). $240/month cushion = $2,880/year flexibility for vacations, repairs, savings. Many who max out at 28% feel "house poor" - can afford payment but nothing else. 25% rule leaves breathing room. Affords $335k vs $353k but much less financial stress.
Pay Off High-Interest Debt Before House Shopping
$8k income, $600/month debts (36% = $2,280 for housing). Pay off $15k credit card over 1 year: new DTI with $250/month debt = 36% allows $2,630 housing ($350 more/month = $55k more home). One year of aggressive debt payoff = qualify for $305k vs $360k. Delay buying 12 months, gain $55k buying power + better rate from improved credit score.
Get Pre-Approved, Not Just Pre-Qualified
Pre-qualified (soft check, self-reported income) says you "might" afford $400k. Pre-approved (hard credit pull, income verification, full underwriting) guarantees $362k. Bidding on $390k home with pre-qual = offer rejected or denied at closing. Pre-approval shows sellers you're serious, closes faster, avoids disappointment. Always get pre-approved before shopping.
Factor in Property Tax Surprises in First Year
Bought $350k home, previous owner (senior) paid $200/month tax (exemption). Your tax as new owner: $437/month (1.5% rate without exemption). Budgeted $200 = short $237/month = $2,844/year. Always calculate tax at full non-exempt rate. New construction may have low tax year 1 (unimproved land value), then reassess year 2 = tax doubles. Check tax history and exemptions.
Don't Forget HOA Fees in Condo/Townhome
Condo $300k looks affordable. $200 HOA seems low. Year 2: special assessment $12k for roof + HOA rises to $350/month. $150/month extra = $1,800/year permanently + $12k one-time. HOA-governed properties carry assessment risk. Read HOA financial statements (reserves, pending projects). $50k reserve for 100-unit building = only $500/unit (underfunded = assessments coming).
Calculate for One Income in Dual-Income Households
Combined $15k/month income affords $700k home (28% = $4,200). Spouse earns $7k, might take parental leave or quit. Qualify on one income: $8k × 28% = $2,240 = $353k home. Buying $700k = vulnerable if lose one income. Conservative: qualify on higher single income only. If need both incomes, buy at 25% of combined, not 28%.
Account for Homeowner Costs Beyond PITI
Qualified for $2,500/month PITI (P&I $1,600 + tax $600 + insurance $300). Forgot: maintenance 1% = $333/month, utilities $250 (vs $100 renting), HOA $200, lawn care $100. True monthly cost: $3,383 vs $2,500 budgeted. Short $883/month. Budget total cost: PITI + 1-2% maintenance + utilities + landscaping + HOA. Then apply 28% to total, not just PITI.
Run Numbers at Higher Interest Rates for Protection
Qualified at 6.5% for $353k. Rate rises to 7% by closing (2 months later) = only qualify for $335k ($18k less). Lock rate immediately after pre-approval (30-60 day lock). Or qualify at 7% when rates are 6.5% = 0.5% cushion. Rising rates between approval and closing cause many deals to fall through. Always lock rate or qualify at higher rate.
Common Mistakes to Avoid
✓ Better approach: $8k income × 28% = $2,240 housing, bought $353k home. Spent $70k down payment + closing, left with $5k savings. AC breaks ($6k) = credit card debt @ 24%. Should have bought $300k home ($2,000 payment), kept $20k emergency fund. Affordability isn't just DTI ratio - need 6-12 months expenses liquid AFTER closing. Never drain savings to maximize purchase price.
✓ Better approach: $96k salary = $8k/month gross × 28% = $2,240 housing (29% of gross). But take-home after taxes: $6,200. $2,240 ÷ $6,200 = 36% of net income. Adding other expenses (food $800, transport $500, insurance $300) = 61% of net to housing + basics = no discretionary money. Feels unaffordable despite meeting 28% gross rule. Consider net income comfort, not just gross DTI qualification.
✓ Better approach: $8k income, $350 car + $250 credit card = $600 debts reported. 36% = $2,880 - $600 = $2,280 housing (approved). Forgot to disclose: $150 student loan (deferment), $75 child support. True debts: $875. Rerun: $2,880 - $875 = $2,005 housing. Underwriter finds undisclosed debts = denied at closing. Include ALL debts: auto, student, personal, credit card minimums, child support, alimony.
✓ Better approach: Bought $400k at max 28% of $9k income ($2,520 housing). Thought "I'll get 10% raise next year." No raise for 3 years + property tax rose 8%, insurance 15% = payment $2,520 → $2,747 on same $9k income (30.5% ratio). Stressed budget, can't save, lifestyle suffers. Buy based on CURRENT income, treat raises as bonus for savings, not assumed in qualification.
✓ Better approach: $10k income, no debts, qualified 36% = $3,600 housing, bought $575k home. Then: private school $1,500/month + daycare $1,200 = $2,700 new expenses. Total obligations: $3,600 housing + $2,700 kids = $6,300 (63% of income). Can't afford. Should have budgeted kids' future costs before qualifying. Know your full life costs beyond DTI formula.
✓ Better approach: Used generic calculator showing $400k affordability @ $8k income. Assumed 1% property tax, $100 insurance. Buying in Texas: 2.5% tax ($833/month vs $333) + $180 insurance. Real PITI: $2,843 vs $2,240 calculated (exceeded 28% by $603/month). Only afford $320k in Texas vs $400k elsewhere. Always use LOCAL tax rates and insurance quotes in affordability calculation.
✓ Better approach: Normally $7k salary + $2k overtime (not guaranteed) = qualified at $9k. Bought $420k (28% of $9k). Overtime cut = income $7k. Housing 28% of $7k = $1,960 (comfortable max). Actual: $2,520 = 36% of reduced income = severe stress. Lenders require 2-year bonus/OT history but it's not guaranteed. Qualify on BASE salary only unless OT/bonus contractually guaranteed.
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Frequently Asked Questions
How much house can I afford?
Lenders use the 28/36 rule: housing costs shouldn't exceed 28% of gross monthly income, and total debt shouldn't exceed 36%. However, just because you qualify for a certain amount doesn't mean you should spend it all. Consider your lifestyle, savings goals, and emergency fund when deciding.
What is the 28/36 rule?
The 28/36 rule is a lending guideline: 28% = maximum housing costs (mortgage, taxes, insurance, HOA) as a percentage of gross monthly income. 36% = maximum total debt payments (housing + car + credit cards + loans) as a percentage of gross monthly income. Exceeding these ratios makes loan approval difficult.
Should I max out my home budget?
No! While lenders may approve you for 28% of income, aim for 25% or less for comfort. Maxing out leaves little room for emergencies, savings, or lifestyle changes. Consider job stability, future income potential, and other financial goals before committing to the maximum amount.
How much down payment do I need?
20% down is ideal (avoids PMI, better rates, lower monthly payment), but not required. Conventional loans: 3-5% down. FHA loans: 3.5% down. VA loans: 0% down for veterans. USDA loans: 0% down in eligible rural areas. Lower down payments mean higher monthly payments and PMI costs.
What other costs should I consider?
Beyond mortgage, budget for: property taxes (1-2% of home value annually), homeowners insurance ($1,000-3,000/year), HOA fees ($100-700/month), maintenance (1% of home value annually), utilities ($200-400/month), and closing costs (2-5% of purchase price). These add up quickly!
Financial Disclaimer
This calculator is provided for educational and informational purposes only. The results are estimates based on the information you provide and should not be considered as financial, legal, or tax advice.
Actual results may vary based on your specific circumstances, market conditions, and other factors. Always consult with qualified financial, legal, and tax professionals before making any financial decisions.
We make no guarantees about the accuracy, completeness, or reliability of the calculations. Use this tool at your own risk.