Home affordability calculator
Enter your income, debts and down payment to see the most a lender would let you spend, and what the monthly payment at that price would be.
- Monthly income before tax$7,916.67
- Housing budget (28% of income)$2,216.67
- Room under total debt limit (36% minus $450.00 debts)$2,400.00
- Maximum monthly housing payment$2,216.67
- Down payment$40,000.00
- Loan amount$286,192.24
- Principal and interest (6.5%)$1,808.93
- Tax and insurance (1.5% of price a year)$407.74
- Total debt-to-income at that price33.68%
How to use it
- Enter your gross yearly income and the monthly payments on any debts you already have.
- Enter your down payment and the rate you've been quoted.
- Pick the lending rule. Conservative is what most advisers suggest; the typical maximum is what many lenders will actually approve.
- Read the maximum price. The rows show the payment at that price and how much of your income it takes.
Worked example
Income $95,000, $450 a month in debts, $40,000 down, 6.5% over 30 years, conservative rule.
Monthly income is $7,916.67. Housing cap is 28%: $2,216.67. Debt cap is 36% minus $450: $2,400.00. The lower one, $2,216.67, is the budget. With tax and insurance at 1.5% of the price a year, that buys a home up to $326,192.24: a $286,192 loan costing $1,808.93 a month plus $407.74 tax and insurance, 33.7% of income with the other debts.
How it's calculated
maximum housing payment = the smaller of (income ÷ 12 × housing ratio) and (income ÷ 12 × total debt ratio − monthly debts)
That payment covers principal, interest, tax and insurance. With k the monthly payment per dollar of loan and t the yearly tax-and-insurance rate ÷ 12:
maximum price = (maximum payment + down payment × k) ÷ (k + t)
loan = maximum price − down payment. The result is rounded down to the cent so the payment never exceeds the limit.
FAQ
Is the maximum what I should spend?
No. It's what a lender's ratios allow. Childcare, commuting, retirement saving and an emergency fund aren't in the formula. Many people are more comfortable 10% to 20% below the conservative figure.
What counts as a debt payment?
Anything on your credit report with a monthly payment: car loans, student loans, personal loans, and the minimum payment on credit cards. Rent, utilities, phone plans and insurance don't count.
Does a bigger down payment raise the price much?
Dollar for dollar, roughly. Every extra $10,000 down adds about $10,000 to the price while leaving the payment unchanged, and crossing 20% removes mortgage insurance, which frees up more of the payment for principal.
Why does the rate change the answer so much?
Because the payment limit is fixed by income, a higher rate means each dollar of payment buys less loan. Going from 5.5% to 7% cuts the affordable loan by about 15%.