How to use the mortgage affordability calculator
- Enter your gross income and how often you are paid, your other monthly debt payments and the down payment you have saved.
- Enter the interest rate and loan term from a lender quote, plus the property tax rate, insurance and any HOA dues. The defaults are examples, not current market data.
- Open More options to add a mortgage insurance quote and to change the two ratio limits. The defaults of 28 and 36 percent are common rules of thumb, and lenders differ.
- Read the estimated maximum price, the payment breakdown and which limit set the price. Print, copy or save a PDF to share with a lender or partner.
Formula
Front-end limit = housing limit % x gross monthly income
Back-end limit = total debt limit % x gross monthly income - other monthly debts
Maximum housing payment H = the lower of the two limits
Payment factor k = r / (1 - (1 + r)^-n), where r = APR / 12 and n = years x 12
Price = (H - insurance / 12 - HOA - mortgage insurance + down payment x k) / (k + tax rate / 12)
Principal and interest on the loan (price minus down payment, times k) plus monthly property tax (price times the tax rate / 12) plus the fixed costs equals H at the solved price. The price is rounded down to a whole dollar, so the payment never exceeds the limit.
Worked examples
Defaults: a $90,000 income is $7,500 a month. The 28 percent front-end limit is $2,100 and the 36 percent back-end limit is $2,200 after $500 of other debts, so the front-end limit applies. With $40,000 down, a 6.5 percent rate, 30 years, a 1 percent tax rate and $1,500 of yearly insurance, the maximum price is $311,409. The loan is $271,409, principal and interest is $1,715.49, tax is $259.51 and insurance is $125.00, which add up to exactly $2,100.00.
Heavier debts: raise other debts to $2,000 a month and the back-end limit falls to $700, so it now sets the price at $115,715. The front-end limit alone would have allowed $311,409, which shows why debts can matter more than income.
A 15-year loan: with a 1.2 percent tax rate, $1,800 insurance, $100 HOA dues and $80 mortgage insurance, the price is $218,147 and the loan is $178,147. A shorter term has a bigger payment per dollar borrowed, so the same budget buys less house.
Front-end and back-end ratios
Lenders often look at two debt-to-income ratios. The front-end ratio compares your full housing payment (principal, interest, property tax, insurance, HOA dues and mortgage insurance) with gross income. The back-end ratio adds your other monthly debts, such as car loans, student loans and card minimums.
The defaults of 28 and 36 percent are widely quoted rules of thumb, not requirements. Some loan programs allow higher ratios, and some lenders apply lower ones. Both limits are editable here so you can test a conservative plan or a stretch scenario. The result shows which limit is lower, because that one sets your price.
What an affordable payment is not
A lender saying you can borrow a certain amount is not the same as that amount being comfortable. The ratios use gross income, so they ignore income taxes, childcare, commuting, savings goals and irregular costs. Treat the output as the upper edge of a range and consider a lower limit if your budget is tight.
A down payment under 20 percent often triggers mortgage insurance, which adds to the monthly cost. This tool does not guess the amount. Enter a quote under More options so the payment reflects it.
Costs beyond the monthly payment
Buying also costs cash at closing, and owning means maintenance and repairs. Use the closing cost calculator to estimate cash to close, the property tax calculator to turn a local rate into a yearly bill, and the mortgage calculator for a full amortization schedule at the price you settle on.
Assumptions and limits
- A fixed-rate loan with level monthly payments. Adjustable rates, interest-only loans and special loan programs are not modeled.
- The front-end and back-end limits are rules of thumb you can change. Lenders set their own limits and also weigh credit score, savings, loan type and property type.
- Property tax is a percent of the home price, and insurance, HOA dues and mortgage insurance are the amounts you enter. None are looked up and none change over time.
- Income is steady and taxed as you earn it. The ratios use gross income, as lenders usually do.
- Closing costs, moving costs, maintenance, reserves and rate changes are not included. This is an estimate, not a pre-approval or financial advice.
Frequently asked questions
How much house can I afford?
It depends on income, debts, down payment, the rate and your local taxes and insurance. The calculator solves for the highest price at which the full monthly housing payment stays within both lender-style limits that you choose.
What is the 28/36 rule for housing?
It is a rule of thumb that housing should take no more than 28 percent of gross income and all debts no more than 36 percent. The tool applies both limits and uses whichever allows the smaller payment.
Why is my result lower than what a lender offers?
Lenders may allow higher ratios, count income differently or use loan programs with other limits. This estimate follows the percentages you enter, so raising them moves the result toward a looser lender approach.
Does a bigger down payment raise the price I can afford?
Yes. Each extra dollar of down payment is a dollar you do not borrow, so it lifts the price by a little less than a dollar once property tax on the higher price is counted. The effect stops when the loan reaches zero.
Are the tax and insurance defaults accurate for my area?
No. They are labeled examples. Property tax rates and insurance premiums vary widely, so replace both with figures for the area you are shopping in or from a quote.