Home Affordability Calculator

What is a home affordability calculator?

A home affordability calculator estimates the most expensive home you could buy based on your income, your debts and your down payment. It turns those numbers into a monthly payment limit, then works out what price fits inside it. Use it before you start house hunting to set a realistic search range. It shows a ceiling, not a recommendation. You may feel better buying for less.

How to use this calculator

1. Enter your annual household income before taxes.
2. Enter your monthly debt payments, such as car loans, student loans and credit card minimums.
3. Enter your down payment.
4. Enter the mortgage rate (APR) you expect, and pick a loan term: 15, 20 or 30 years.
5. Enter the property tax rate for the area where you want to buy.
6. Press Calculate Affordability to see your maximum home price, loan amount and monthly payment breakdown.

The fields start with example values. Replace them with your own.

How the calculator works

Many lenders look at two limits, known as the 28/36 rule:

• Housing limit: your monthly housing cost should be no more than 28% of your gross (before-tax) monthly income.
• Total debt limit: your housing cost plus all other monthly debts should be no more than 36% of your gross monthly income.

The calculator uses whichever limit is lower to set your maximum monthly housing payment. Housing cost here means loan principal and interest, property taxes and homeowners insurance. It then finds the home price where that payment fits. Homeowners insurance is estimated at about 0.5% of the home price per year.

Example: the calculator’s starting values

Income $100,000, monthly debts $400, down payment $50,000, 7% rate, 30-year loan, 1.2% property tax.

• Gross monthly income: $100,000 ÷ 12 = $8,333
• 28% housing limit: $2,333
• 36% total debt limit, minus $400 of debts: $2,600
• The lower limit wins, so your housing budget is $2,333 a month
• Maximum home price: about $330,370, with a loan of about $280,370

How your choices change the result

Same example, one change at a time:

A few things stand out:

• Rates matter. One point lower adds about $25,000 to the price you can afford.
• Debts can become the limit. With $400 of debts the 28% limit applies. At $1,000 of debts the 36% limit takes over, and the price drops.
• Extra down payment helps. Each extra $10,000 down adds about $8,200 to the price.
• Shorter loans cost more per month, so the same budget buys a cheaper home. You also pay less interest overall.

What the calculator does not include

• Private mortgage insurance, which often applies when you put down less than 20% on a conventional loan
• HOA fees
• Maintenance and repairs
• Utilities
• Closing costs
• Your credit score (it affects the rate you are offered, so enter the rate you expect) Add these to your budget before you decide.

Tips before you buy

• Do not treat the result as the amount you should borrow. Check it against your real monthly budget.
• Leave room for savings, emergencies and other goals.
• Compare rates from more than one lender.
• Ask a lender for a pre-approval to see what they would actually offer.

Frequently Asked Questions