Mortgage Affordability Calculator

A common rule: home price 3-5x annual gross income with 20% down. Example: $100,000 income suggests affordable home around $300,000-$500,000. But income alone isn't enough — also factor existing debts, down payment, interest rates, taxes, and insurance. The 28/36 rule is more precise: housing costs ≤ 28% of gross monthly income; total debt ≤ 36%. With $100,000 income ($8,333/month), max housing payment is ~$2,333. At 6.5% rate, 30 years, 20% down — that supports a home around $380,000. The calculator gives a personalized affordability range based on your full financial picture.

The 28/36 rule: housing costs (PITI — principal, interest, taxes, insurance) should be no more than 28% of gross monthly income, and total debt payments (housing + car + student loans + credit cards) no more than 36%. Example: $9,000 monthly gross income — housing ≤ $2,520, total debt ≤ $3,240. If you have $500/month in other debt, max housing is $2,740. Lenders use this to qualify mortgages. Going above 36% strains finances even if a lender approves. Aggressive borrowers stretch to 40-45%, but that often leads to house-poor outcomes. The calculator applies these ratios to your specific income.

Debt-to-Income (DTI) = Total monthly debt payments / Gross monthly income. Lenders typically want DTI under 43%, ideally below 36%. Example: $8,000 monthly income, $500 car loan, $300 student loan, $200 credit card minimums = $1,000 existing debt. Mortgage payment $2,000 brings total debt to $3,000 — DTI = 37.5%. Higher DTI means smaller mortgage approval and worse rates. Pay down high-interest debt before applying. Even minimum credit card payments hurt DTI. Auto loans and student loans count fully. The calculator shows how much DTI changes affect home affordability.

Conventional loans typically require 5-20% down. 20% down avoids PMI (Private Mortgage Insurance, ~0.5-1.5% annually). FHA loans allow 3.5% down for qualifying buyers. VA loans (military) allow 0% down. Example: $400,000 home at 20% down = $80,000 down payment + closing costs (~$8,000-$12,000). At 5% down, you'd put $20,000 but pay PMI of ~$200/month until reaching 20% equity. Larger down payment lowers monthly payment, total interest, and avoids PMI. But don't drain emergency funds — keep 3-6 months of expenses liquid. The calculator shows affordability at various down payment levels.

PITI = Principal + Interest + Taxes + Insurance. The complete monthly housing cost lenders use to qualify you. Principal/interest is the loan repayment; property taxes vary by location (1-2.5% of home value annually); homeowners insurance ($1,000-$3,000 annually); plus PMI if down payment under 20%. Example: $350,000 home, $280,000 loan at 6.5%, 30 years. P&I = $1,770/month. Property tax $400/month, insurance $125/month, PMI $200/month. Total PITI = $2,495. Always budget on PITI, not just principal-and-interest, otherwise the real cost feels higher than expected. The calculator includes all four components.

PMI typically costs 0.5-1.5% of loan amount annually, paid monthly. Example: $300,000 loan at 1% PMI = $3,000/year or $250/month. PMI raises your monthly payment, reducing how much house you can afford under the 28/36 rule. With $2,800 max housing budget, $250 of PMI eats into available principal-and-interest budget — reducing affordable home price. PMI drops off automatically at 78% LTV, or you can request removal at 80%. Some buyers prefer paying it temporarily to get into a home sooner; others save for full 20% down. The calculator factors PMI into affordability scenarios.

Yes, if both incomes are stable and both will be on the loan. Combined income raises DTI capacity and affordability. Example: solo income $80,000 supports ~$300,000 home; combined $140,000 supports ~$500,000+. But if one spouse has poor credit, joint application may hurt rate qualification. Some couples apply with only the higher-credit spouse to get a better rate, accepting a smaller loan. Income stability matters — variable income (commission, freelance) is harder to qualify. Lenders typically want 2 years of income history. Always weigh affordability vs strain on the better-earning spouse if one income is lost. The calculator handles dual-income scenarios.