Home› Finance› Home Affordability Calculator
🏡 Finance Home Affordability Calculator
🏡

Home Affordability Calculator

Find your maximum home price, check if a specific home fits your budget, and plan your down payment

$/yr
$/mo
$
%
▾
%/yr
$/yr
Max Home Price (28% rule)
$0
Max home price (36% rule)$0
Maximum loan amount$0
Est. monthly payment (PITI)$0
Front-end DTI0%
Back-end DTI0%
28% Rule Max
$0
36% Rule Max
$0
Monthly PITI
$0
$
$/yr
$/mo
$
%
▾
%/yr
$/yr
Affordability Verdict
—
Based on 28/36 rule
Monthly PITI payment$0
Front-end DTI0%
Back-end DTI0%
Income needed for this home$0/yr
Monthly principal & interest$0
Monthly taxes$0
Monthly insurance$0
$
%
$
$/mo
%/yr
Months to Save Down Payment
—
At your savings rate
Down payment needed$0
Current gap$0
PMI cost (if <20% down)$0/mo
PMI savings if 20% down$0
Closing costs (est. 3%)$0
Total cash needed at closing$0

How Much House Can You Actually Afford?

The most important rule in home buying is understanding the difference between what a lender will approve you for and what you can comfortably afford. Lenders will often approve you for the maximum amount their guidelines allow — but that maximum may leave you "house poor," with little money left for savings, emergencies, or discretionary spending.

The 28/36 Rule Explained

The 28/36 rule is the gold standard used by lenders, financial advisors, and the Consumer Financial Protection Bureau to assess home affordability. It has two parts:

  • Front-end ratio (28%): Your total monthly housing payment (PITI — principal, interest, property taxes, and insurance) should not exceed 28% of your gross monthly income.
  • Back-end ratio (36%): All monthly debt payments combined — housing plus car loans, student loans, credit card minimums, and other obligations — should not exceed 36% of gross monthly income.

Real example: Gross annual income of $85,000 = $7,083/month. The 28% front-end limit puts your maximum housing payment at $1,983/month. After subtracting property tax (~$300/mo) and insurance (~$117/mo), you have roughly $1,566 for principal and interest. At 6.75% on a 30-year loan, that supports a loan of approximately $238,000. Add a $30,000 down payment and your maximum home price is roughly $268,000.

If you also have $400/month in car and student loan payments, the 36% back-end rule kicks in: total allowable debt = $7,083 × 36% = $2,550/month. Subtract existing debt ($400) and you have $2,150 for housing — slightly more than the 28% limit. The binding constraint is the more restrictive of the two rules, which is typically the 28% front-end when existing debts are moderate.

The Hidden Costs of Homeownership

First-time buyers often focus only on the mortgage payment, overlooking costs that can add $500–$1,500+/month to the true cost of ownership. Here's what you need to budget for beyond principal and interest:

  • Property taxes: The national average is about 1.1% annually, but rates vary enormously — from 0.3% in Hawaii to 2.5%+ in New Jersey. On a $350,000 home at 1.1%, that's $3,850/year ($321/month) built into your PITI payment.
  • Homeowners insurance: Typically $1,200–$2,000/year ($100–$167/month) for a standard home. Flood or earthquake zones can push this significantly higher.
  • HOA fees: Common in condos and planned communities. Ranges from $150 to $600+/month. These are not included in PITI but are considered by lenders in your DTI calculation.
  • Maintenance and repairs: Budget 1% of home value annually ($3,500 on a $350,000 home). Older homes may require more. This covers HVAC servicing, roof repairs, appliance replacement, plumbing, etc.
  • PMI: If your down payment is under 20%, expect to pay 0.5–1.5% of the loan annually. On a $300,000 loan at 0.75%, that's $2,250/year ($187.50/month) until you reach 80% LTV.
  • Closing costs: 2–5% of the loan amount, due upfront. On a $350,000 purchase with 10% down ($315,000 loan), expect $6,300–$15,750 in closing costs covering appraisal, title insurance, lender fees, and prepaid items.

Down Payment Strategies

Your down payment choice has long-term financial implications. Here are the most common options:

  • 3% down — Conventional (Fannie Mae/Freddie Mac): Available to first-time buyers with qualifying income. Requires PMI, which on a $300,000 loan adds ~$1,800–$4,500/year in PMI costs.
  • 3.5% down — FHA loan: Available with credit scores as low as 580. Includes MIP (mortgage insurance premium) — both an upfront fee (1.75% of loan) and annual MIP (0.55–1.05%). MIP lasts the life of the loan if you put less than 10% down.
  • 20% down — Conventional (no PMI): Eliminates PMI, typically qualifies you for better rates, and gives immediate equity cushion. On a $350,000 home, this requires $70,000 in cash plus closing costs.

How Interest Rates Change What You Can Afford

Interest rates are one of the most powerful variables in home affordability. The same loan amount has dramatically different monthly payments at different rates:

$300k loan at 5%
$1,610/mo
$300k loan at 6%
$1,799/mo
$300k loan at 7%
$1,996/mo
$300k loan at 7.5%
$2,097/mo
$300k loan at 8%
$2,201/mo
$300k loan at 8.5%
$2,306/mo

If your budget allows $1,800/month for principal and interest, you can borrow $300,000 at 6% but only about $257,000 at 8% — a $43,000 reduction in purchasing power from a 2% rate increase. This is why timing, rate locks, and shopping multiple lenders can make a significant difference in what you can actually buy.

Frequently Asked Questions

How much house can I afford on my salary? ▼
A general guideline is that your home should cost no more than 3–4× your gross annual income. More precisely, lenders use the 28/36 rule: your housing costs (PITI — principal, interest, taxes, insurance) should not exceed 28% of gross monthly income, and all debt payments combined should not exceed 36%. On an $85,000 annual salary ($7,083/month gross), the 28% rule limits housing to $1,983/month PITI, which typically supports a home price of roughly $280,000–$320,000 depending on interest rates, down payment, and property taxes.
What is the 28/36 rule for home affordability? ▼
The 28/36 rule is the standard guideline used by most mortgage lenders. The front-end ratio (28%) means your monthly housing payment (principal + interest + property tax + home insurance) should not exceed 28% of your gross monthly income. The back-end ratio (36%) means all monthly debt payments combined — housing plus car loans, student loans, credit card minimums — should not exceed 36% of gross income. Exceeding these ratios doesn't automatically disqualify you, but lenders will scrutinize the application more carefully, and you may face higher rates or stricter terms.
How much down payment do I need to buy a house? ▼
You need as little as 3% down for conventional loans (Fannie Mae HomeReady) or 3.5% down for FHA loans. However, any down payment below 20% on a conventional loan requires Private Mortgage Insurance (PMI), which adds $50–$200+/month to your payment. VA loans (for veterans) and USDA loans (rural areas) require 0% down. Putting 20% down eliminates PMI, gives you immediate equity, and may qualify you for better rates. On a $350,000 home, 20% down = $70,000 — plus 2–5% in closing costs ($7,000–$17,500).
What is PMI and how much does it cost? ▼
PMI (Private Mortgage Insurance) protects the lender — not you — if you default on your mortgage. It's required when your down payment is less than 20% of the home price (loan-to-value ratio above 80%). PMI typically costs 0.5%–1.5% of the loan amount annually. On a $300,000 loan at 0.75% PMI rate, that's $2,250/year or $187.50/month. The good news: PMI is automatically canceled once your loan balance reaches 80% of the original home value (usually after several years of payments and appreciation). You can also request cancellation earlier once you hit 80% LTV.
How do interest rates affect home affordability? ▼
Interest rates have a massive impact on what you can afford. A 1% rate increase reduces purchasing power by roughly 10–12%. Example with a $300,000 loan: at 5% → $1,610/month principal and interest; at 6% → $1,799/month; at 7% → $1,996/month; at 8% → $2,201/month. That's a $591/month difference between 5% and 8%. If your budget maxes at $1,800/month for P&I, you can borrow $300,000 at 6% but only $257,000 at 8% — a $43,000 reduction in buying power from a 2% rate change.
What are the hidden costs of buying a home? ▼
Beyond your down payment and mortgage, budget for: (1) Closing costs: 2–5% of the loan amount ($6,000–$15,000 on a $300,000 loan). (2) Property taxes: national average ~1.1% annually but varies widely by location (0.3% in Hawaii to 2.5%+ in New Jersey). (3) Homeowners insurance: $1,200–$2,000/year typically. (4) HOA fees: $200–$600/month in condos and planned communities. (5) Maintenance: budget 1% of home value annually ($3,000/year on a $300,000 home). (6) Utilities: typically higher than renting. (7) PMI if down payment under 20%. (8) Moving costs: $1,000–$5,000 locally, more for long-distance.
What credit score do I need to buy a house? ▼
Minimum credit scores by loan type: FHA loan with 3.5% down → 580; FHA loan with 10% down → 500; Conventional loan → 620; VA loan → typically 620 (no official minimum); Jumbo loan → 700+. Best rates require 740+. Below 620, you'll likely be limited to FHA or subprime lenders with higher rates. Each 20-point improvement in your credit score typically reduces your rate by 0.1–0.25%, saving thousands over the life of the loan. Pay down credit cards to below 30% utilization and fix any errors on your credit report before applying.
Should I buy a house or keep renting? ▼
The rent vs. buy decision depends on the price-to-rent ratio, how long you'll stay, and your financial stability. Rule of thumb: if the home price ÷ annual rent is below 15, buying likely makes financial sense. Above 20, renting is usually better financially. If you plan to move within 3–5 years, renting is almost always better — closing costs and transaction costs eat into gains. Buying makes the most sense when: (1) You plan to stay 5+ years, (2) Local prices are reasonable relative to rents, (3) You have a stable income and solid emergency fund, (4) The mortgage payment (including all costs) is close to or below local rent.
Related
🏠
Mortgage Calculator
⚖️
Rent vs Buy Calculator
🏦
Savings Goal Calculator