How to Use This Home Affordability Calculator
Determine how much house you can afford in 6 simple steps:
- Annual household income: Enter your combined gross income before taxes.
- Monthly debt payments: Include car loans, student loans, credit cards, and any other monthly obligations.
- Down payment available: The amount you can put down (3-20% typical range).
- Current mortgage rate: Enter today's mortgage interest rate.
- Loan term: Choose 15, 20, or 30 years.
- Property taxes & insurance: Enter estimated annual costs (varies by location and home price).
The calculator applies the 28/36 lending rule to show your maximum home price, recommended range, and whether specific prices fit your finances. You'll see your required income for each price point and your debt-to-income ratio.
The 28/36 Rule: The Gold Standard of Home Affordability
The 28/36 rule is the industry-standard guideline used by almost all mortgage lenders to determine how much you can borrow:
- 28% rule: Your housing costs (mortgage, property tax, insurance, HOA) shouldn't exceed 28% of your gross monthly income.
- 36% rule: Your total debt payments (housing + car loans + credit cards + student loans) shouldn't exceed 36% of gross monthly income.
Example: If you earn $100,000/year ($8,333/month gross), you can afford up to $2,333/month in housing costs (28%) and $3,000/month in total debt (36%). If you have $500/month in car payments, you can allocate $2,500 to a mortgage—limiting your home price to roughly $400,000 at current rates.
Most lenders will approve loans up to 43% debt-to-income ratio, but this is riskier. The further below 36% you stay, the more financial cushion you have for emergencies and rate increases.
Factors Affecting How Much House You Can Actually Afford
Beyond the 28/36 rule, consider:
- Credit score: A 750+ score qualifies for better rates than a 650 score. A 1% interest rate difference changes your purchase power by $50,000+.
- Down payment: Larger down payments (20%+) avoid PMI, significantly reducing your monthly payment.
- Property taxes: Vary wildly by location (0.5-2% of home value annually). A $500K home in high-tax areas costs $500-1000/month extra.
- HOA fees: Some neighborhoods charge $500+ monthly. This counts as housing expense.
- Future rate increases: If you choose an ARM, plan for rates to rise. A 7% mortgage can become 8-9%.
- Emergency savings: Even if you can technically afford a $500K home, consider whether you have 6-12 months emergency savings set aside.