Bureau of Wealth

Home Affordability Calculator: How Much House Can I Afford

By the Bureau of Wealth team Updated

This calculator is general information, not financial advice. Check your own figures with the provider or a qualified adviser before acting on them.

Enter your income, monthly debts and down payment to see the highest home price whose full monthly payment fits within the housing and total debt limits you set.

Car loans, student loans, minimum card payments. Not rent.

You may need it on a conventional loan with less than 20% down. Use the rate from your lender’s quote.

Check the highlighted fields to see your results.

What this calculator assumes

  • Both limits are measured against your household income before tax, divided by 12, which is how debt-to-income ratios are normally worked out.
  • The mortgage has a fixed interest rate for the whole term. Mortgage insurance is charged at the yearly rate you enter on the loan amount and stays the same for the whole calculation.
  • Property tax is a percentage of the price, and insurance and HOA dues are the fixed amounts you enter. Your real tax bill depends on your local assessment and can change.
  • All of your down payment goes toward the price. Closing costs, moving costs and cash reserves are not included, so you need money for those on top.
  • Monthly debts are only the payments you enter. The calculator does not check your credit score, loan program rules or a lender's own limits.

You might also want to check

How the calculator works

Your monthly housing payment is more than the mortgage. It is often summed up as PITI: principal, interest, property taxes and homeowners insurance. The calculator adds HOA dues and private mortgage insurance (PMI) if they apply.

It sets two limits on that payment. The first is your housing limit: a share of your gross monthly income. The second is your total debt limit: a larger share of income, minus the monthly debt payments you already make. Whichever limit is lower becomes your budget. The calculator then finds the price whose full monthly payment, with your down payment taken off the loan, uses exactly that budget.

Where the 28% and 36% come from

The Consumer Financial Protection Bureau's home buying worksheet says a mortgage lending rule of thumb is that total monthly housing costs should be no more than 28% of your pre-tax income, and that lenders may approve you for more or less depending on your overall finances. The CFPB's debt-to-income worksheet suggests homeowners consider keeping all debts, including the mortgage, at 36% or less, and notes that some lenders will go up to 43% or higher.

These are guidelines, not legal limits, and different loan products and lenders use different ones. The calculator starts at 28% and 36%, and you can change both.

A worked example

Say your household earns $120,000 a year and pays $500 a month on a car loan. You have $60,000 for a down payment, and assume a 30-year loan at 6.5%, property tax of 1.2% a year, $1,800 a year for insurance and no HOA dues.

Your gross monthly income is $10,000. The housing limit allows $2,800, and the total limit allows $3,600 minus $500, or $3,100, so the housing limit applies. The highest price that fits is $413,792, with a loan of $353,792. The $2,800 payment splits into $2,236.21 of principal and interest, $413.79 of property tax and $150 of insurance.

That down payment is 14.5% of the price. The CFPB notes that you may need PMI on a conventional loan if you put down less than 20%. If your lender quoted PMI at 0.5% of the loan a year, the price that fits falls to $394,740, with $139.48 a month going to mortgage insurance.

What changes the result

The interest rate has a large effect. In the example, a rate of 5.5% instead of 6.5% raises the affordable price to $447,847. Debts matter too: with $1,500 a month of other payments, the total limit leaves only $2,100 for housing and the price drops to $318,173.

Raising the total limit to 43% in that case would bring the price back up to $413,792 but no further, because the 28% housing limit then holds it down. That is a useful check: the calculator tells you which limit is binding, so you know whether paying off debt or earning more would make the bigger difference.

Using the result

What a lender will approve and what you are comfortable paying are different questions. Compare the monthly payment with your current rent and savings, and leave room for repairs and emergencies. Then budget for the cash you need at closing with the closing costs calculator.

Frequently asked questions

What is the 28/36 rule?

It is a common guideline that housing costs should be no more than 28% of gross income and all debts no more than 36%. The CFPB describes 28% as a rule of thumb and suggests 36% or less for all debts, while noting some lenders go higher.

What counts as a monthly debt payment?

Include car loans, student loans, personal loans and minimum credit card payments. Do not include rent, because the new housing payment replaces it. Check your credit report for any accounts you might have forgotten.

When do I need private mortgage insurance?

You may need PMI on a conventional loan if your down payment is less than 20% of the price. Ask your lender for the cost and enter it as a yearly percentage of the loan.

Why does a bigger down payment not raise the price by the same amount?

Each extra dollar down shrinks the loan, but property tax is charged on the whole price, so part of your budget goes on the higher tax bill. In the example, adding $10,000 to the down payment raises the affordable price by $8,634, to $422,426.

Should I buy the most expensive home the calculator shows?

Not necessarily. The most a lender might approve can leave little room for savings, repairs or other goals. Try lower limits, such as 25% for housing, to see a price that leaves more space in your budget.

Sources

Figures come from institutions millions of people rely on. How we keep calculators accurate.