Mortgage Affordability Calculator
Determine how much house you can truly afford based on your income, debts, and mortgage details.
Your Financial Details
Your Affordability Estimate
Please enter valid, positive numbers for your income, debts, and down payment.
Your Affordability Estimate
Maximum Affordable Home Price
$0
Max Housing Payment (28% Rule)
$0.00
Max Total Debt Payment (36% Rule)
$0.00
Understanding the 28/36 Rule:
This calculator uses the 28/36 rule, a common guideline lenders use to assess your borrowing capacity. It suggests that your monthly housing expenses (including principal, interest, property taxes, and insurance) should not exceed 28% of your gross monthly income, and your total monthly debt payments (including housing and other debts like car loans, student loans, and credit cards) should not exceed 36% of your gross monthly income. The lower of these two limits determines your maximum affordable monthly payment.
Navigating Mortgage Affordability
Buying a home is a significant financial commitment, and understanding what you can truly afford is paramount to a healthy financial future. While rules of thumb like the 28/36 rule provide a good starting point, your personal financial situation and comfort level should always be the ultimate guide.
This calculator helps you get a realistic estimate by incorporating not just your income, but also your existing debt obligations, which lenders scrutinize closely. Remember, the goal is not just to qualify for a loan, but to comfortably afford your home without financial strain.
Factors Influencing Affordability:
- Income Stability: Lenders prefer consistent and verifiable income sources.
- Credit Score: A higher credit score can lead to lower interest rates, significantly impacting your monthly payments.
- Down Payment: A larger down payment reduces the loan amount and can lower your monthly payments and total interest paid.
- Interest Rates: Even small changes in interest rates can have a large impact on long-term costs.
- Property Taxes & Insurance: These ongoing costs are crucial to factor into your monthly budget.
Beyond the Numbers:
- Emergency Fund: Ensure you have a robust emergency fund after your down payment and closing costs.
- Maintenance Costs: Homes require ongoing maintenance and occasional large repairs.
- Lifestyle: Consider if the mortgage payment leaves enough room for your desired lifestyle and other financial goals.
- Future Plans: Think about potential life changes like career shifts, family growth, or retirement.
Frequently Asked Questions
What is the difference between gross and net income?
Gross income is your total income before any deductions (like taxes, retirement contributions, or health insurance premiums). Net income (or take-home pay) is what you receive after all deductions. Lenders typically use your gross income for affordability calculations, but it's important for you to budget based on your net income.
Does this calculator include property taxes and insurance?
This calculator estimates your maximum affordable monthly mortgage payment (principal and interest) based on the 28/36 rule. It assumes that the 28% housing ratio implicitly covers principal, interest, taxes, and insurance (PITI). For a more precise calculation, you would need to estimate your property taxes and insurance separately and factor them into your monthly housing budget.
Why is a lower debt-to-income ratio better?
A lower debt-to-income (DTI) ratio indicates that you have more disposable income relative to your debt obligations. This makes you a less risky borrower in the eyes of lenders and can help you qualify for better loan terms and interest rates. A high DTI can signal financial strain and may make it difficult to get approved for a mortgage.