How Much House Can I Afford? Affordability Calculator

Estimate a realistic home price from your income, debts, interest rate, and down payment. We also account for monthly costs — property taxes, homeowners insurance, PMI, and HOA dues — so the budget reflects your true housing expense. Calculations follow common lender conventions: fixed-rate amortization (Excel’s PMT) and debt-to-income (DTI) checks to gauge affordability.

How much house can I afford?

Annual gross income ($)

Monthly non-housing debts ($)

Include student loans, auto, credit cards, personal loans (not utilities).

Loan term (years)

Interest rate (APR, %)

Down payment (%)

PMI applies when down < 20% on many conventional loans; see HPA rules.

PMI rate (annual %, if DP < 20%)

Property tax rate (% of price, annual)

Homeowners insurance (annual $)

HOA dues ($/mo)

DTI profile

Lenders use debt-to-income (DTI) to gauge capacity. Limits vary by program and AUS (e.g., DU up to 50% for some conventional loans; FHA commonly 31/43).

Max housing DTI (front-end, %)

Max total DTI (back-end, %)

P&I uses the standard fixed-rate formula (Excel PMT). Taxes/insurance/HOA are added as escrow items.

Max home price$0

Loan amount (est.)$0

Down payment (est.)$0

Total monthly payment (PITI + PMI + HOA)$0

What Lenders Look At (and Why DTI Matters)

Debt-to-income ratio compares all monthly debt payments with your gross monthly income. It’s a core measure of capacity, and limits vary by program and lender. A lower DTI generally means more qualifying room; a higher DTI squeezes housing.

Common DTI Benchmarks

Conventional: Many lenders use a traditional 28/36 rule of thumb (28% for housing; 36% for total debts). Desktop Underwriter® (DU) can approve up to 50% total DTI on some loans. Always check the actual underwriting findings.
FHA: FHA counseling materials and policy references commonly cite 31% housing / 43% total as guidelines, with case-by-case exceptions.
Regulatory context (QM): The CFPB’s 2021 update shifted General QM from a fixed 43% DTI cap to a pricing-based test. Lenders still assess DTI, but the hard 43% rule is no longer the sole path to General QM.

How the Calculator Works

The tool solves for the maximum price that keeps your monthly housing cost within your chosen limits. It compares:

Front-end (housing) DTI: max % of income for P&I + taxes + insurance + PMI + HOA.
Back-end (total) DTI: max % of income for all debts. The calculator takes the minimum of the two, so the tighter limit wins — similar in spirit to lender underwriting.

The Payment Formula (Fixed-Rate)

Monthly P&I is computed with the standard annuity formula — the same as Excel’s PMT:

P&I = P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1], where P is the loan amount, r the monthly rate (APR/12), and n the number of payments (years × 12).

What Counts in the Monthly Housing Cost

P&I: Principal and interest on the mortgage (fixed rate, fully amortizing).
Property taxes & homeowners insurance: Often collected monthly via an escrow account; your servicer pays the bills when due. Escrow can change as tax or insurance estimates change.
PMI: With a conventional loan and <20% down, many borrowers pay monthly PMI. Under the Homeowners Protection Act (HPA), borrower-paid PMI generally terminates automatically at 78% of the home’s original value (and may be requested at 80% if you’re current).
HOA dues: Monthly association fees, if applicable.

Step-by-Step: Estimating Your Budget

Enter income and monthly debts. The calculator uses gross income and your non-housing debt payments to model DTI.
Pick a DTI profile. Start with Conventional 28/36 or FHA 31/43, or set custom limits (your lender’s AUS findings might allow more or less).
Set rate & term. Shorter terms raise payment but slash lifetime interest.
Estimate taxes, insurance, HOA. These swing total payment materially; check local tax millage and your insurer’s quote.
Choose down payment & PMI rate. If <20% down, add an estimated PMI percentage; PMI usually drops as you reach ~80% LTV per HPA.

Reading Your Results

Your output includes a max price, estimated down payment, loan amount, and a stacked monthly payment showing P&I, PMI, taxes, insurance and HOA. You’ll also see which constraint bound your result — front-end (housing) or back-end (total) DTI.

Example (illustrative): At $120k income, $500 in monthly debts, 10% down, 6.75% APR, 30 years, 1.2% tax rate, $1,800 insurance, no HOA — the back-end DTI often binds first. Nudging debts lower or increasing down payment can unlock a higher price.

How Programs Differ (and Why You Should Compare)

Program rules and automated underwriting systems (AUS) can change your ceiling. For example, Fannie Mae’s Selling Guide allows up to 50% total DTI for certain DU-approved loans, while FHA counseling materials cite 31/43 as a common guideline (with documented exceptions). Your lender’s findings carry the day, so request Loan Estimates and compare side-by-side.

Tip: Don’t force the highest AUS-approved DTI if it leaves you cash-poor. Build in room for maintenance, utilities, and savings. A conservative target often feels better once you move in.

Key Formulas (Quick Reference)

Metric	Formula	Notes
Monthly P&I	P×r×(1+r)ⁿ ÷ [(1+r)ⁿ−1]	Same as Excel `PMT` for fixed-rate loans.
Front-end DTI	(P&I + taxes + insurance + PMI + HOA) ÷ gross monthly income	Housing ratio.
Back-end DTI	(All monthly debt payments, incl. housing) ÷ gross monthly income	Total DTI. Lender limits vary by program/AUS.
Escrow items	Property taxes ÷ 12; insurance ÷ 12	Usually collected monthly by servicer.
PMI (monthly)	(Annual PMI % × loan) ÷ 12	Borrower-paid PMI typically ends by 78% of original value if current; requestable at ~80%.

Methodology & Disclosures

Calculator logic: Fixed-rate P&I per standard formula; taxes/insurance/HOA added as escrow; PMI modeled as borrower-paid monthly on the original loan amount until ~80% LTV (for education per HPA).
DTI handling: User-selectable front/back DTI. Presets reflect common conventional (28/36) and FHA (31/43) benchmarks; lenders and AUS may approve higher or require lower ratios.
Not advice: Educational content only; verify numbers on your Loan Estimate and with your lender.

Frequently Asked Questions (FAQs)

Does a “fixed” mortgage mean my total payment never changes?

Your P&I is fixed, but escrowed items (taxes or insurance) can change, so your total monthly amount can move up or down.

Is there a universal DTI limit?

No. DTI caps differ by product and AUS findings. For example, certain conventional loans may get DU approval up to 50% total DTI; FHA commonly references 31%/43%. Your lender will confirm your specific limit.

Can I avoid PMI?

Often yes, with ≥20% down on a conventional loan. If you start with less than 20%, borrower-paid PMI generally terminates automatically at 78% of original value (and can be requested at 80%) if you’re current, per the HPA.

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