How this works
The most-googled question in personal real estate: "how much house can I afford?" The answer depends on six numbers — gross income, current debt payments, down payment, mortgage rate, loan term, and the DTI (debt-to-income) ratio you're willing to accept. This calculator solves the inverse mortgage equation: given a maximum monthly housing payment, what loan principal does that buy, and therefore what total purchase price?
The 36% rule is the industry default. Total monthly debt (mortgage PITI — principal, interest, taxes, insurance — plus any other debts like car loans, student loans, credit cards) should not exceed 36% of gross monthly income. The "front-end" version of the rule looks only at the housing payment alone and caps it at 28%. Conservative planners use 28% front-end as the upper bound; aggressive buyers stretch to 43% (the upper limit accepted by Fannie Mae for conventional loans) and FHA loans go to 50%.
Reality-check the answer. The DTI rule misses several real costs: HOA fees, maintenance reserve (budget 1% of home value/year for upkeep), commuting cost differences between candidate locations, and the opportunity cost of locking up the down payment. A house at the DTI-implied maximum is technically affordable but leaves nothing for retirement contributions, emergencies, or vacations. The conservative rule of thumb — "spend less than 25% of take-home pay on PITI" — leaves much more financial breathing room. This calculator gives you the upper bound; pick a target between conservative and the upper bound based on the rest of your life.
The formula
gross_monthly_income before tax. monthly_debts excludes the new mortgage. tax_ins_rate is annual property tax + insurance as a percentage of home value (US averages: tax 1.1%, insurance 0.4% — ~1.5% combined). DTI % default 36%, raise to 43% to push the limit, lower to 28% for safety.
Example calculation
- $8,000/mo gross, $400/mo other debts, $40K down, 6.5% APR, 30-yr loan, 36% DTI, 1.5% tax/insurance.
- Max debt: $2,880/mo. Max housing: $2,480. After ~$370/mo tax+ins, ~$2,110 PI capacity → loan ~$334K. Max home price ≈ $374K.
Frequently asked questions
Is 36% DTI safe or stretched?
It's the lender's upper-bound for "safe" — most banks will lend up to 36–43% DTI without question. From a personal-finance standpoint, 36% leaves only 64% of gross income for everything else: taxes (often 25–30%), retirement (10%+), groceries, transport, savings, and discretionary. Many people find 36% leaves no real margin for retirement contributions or savings. If you want both the house and a healthy retirement plan, target 25–28% front-end DTI, which gives the savings rate room to operate.
What about HOA fees, maintenance, and utilities?
They're not in the DTI formula but they hit your wallet anyway. Budget: HOA / strata 0–1% of home value/year (varies wildly), maintenance reserve 1% of home value/year (replacement of roof, HVAC, appliances), utilities $200–500/month depending on size and climate, lawn care/cleaning if applicable. A $400K house can easily cost $5K–10K/year above the mortgage payment. Ignore these in your affordability calc and you'll be cash-poor 18 months in.
How does a higher down payment change affordability?
Two ways. (1) It directly adds to the max purchase price — a $50K vs $20K down increases the max house by $30K assuming the same loan. (2) Above 20% down on conventional loans you avoid PMI (private mortgage insurance, 0.5–1.5%/yr of loan), which reduces your effective monthly payment and lets you afford ~5–10% more house at the same DTI. So 20% is the natural breakpoint. Below 20%: PMI adds 0.5–1.5% to your effective rate. At 20%+: clean financing, more affordability.