Home Affordability Calculator

How it works

Lenders size a mortgage by two debt-to-income (DTI) ratios. The front-end ratio is your housing payment (principal, interest, property tax and insurance) divided by your gross monthly income. The back-end ratio adds every other monthly debt payment. The largest housing payment you qualify for is the smaller of the two limits.

Part of that payment goes to property tax and insurance. Insurance is the yearly premium you enter; property tax is a percentage of the price, so a bigger house raises it. The calculator solves for the principal-and-interest payment that leaves exactly enough room for both.

That payment is then turned back into a loan amount: the loan whose level monthly payment at your rate and term equals it. Your down payment on top of that loan is the maximum price.

Formula

max housing = min(front % × income ÷ 12, back % × income ÷ 12 − debts)
r = rate ÷ 100 ÷ 12        n = years × 12
a = (1 − (1 + r)^−n) ÷ r     (present value of $1 a month; n when r = 0)
P&I = (max housing − tax % × down ÷ 12 − insurance ÷ 12) ÷ (1 + tax % × a ÷ 12)
max loan = P&I × a
max price = max loan + down payment

Example

On a $120,000 income ($10,000 a month) the 28% front-end limit allows $2,800 of housing, and the 36% back-end limit allows $3,600 − $500 of other debts = $3,100. The front-end limit is lower, so the housing budget is $2,800.

With $60,000 down, 6.5% for 30 years, 1% property tax and $1,800 a year of insurance, $2,297.14 is left for principal and interest. That supports a loan of $363,432.36 and a price of $423,432.36, on which the property tax is $352.86 a month and the insurance $150.00.

Assumptions and limitations

• The ratios are the limits you enter. 28% and 36% are a conventional rule of thumb, not a lender's decision; the 43% back-end cap in the federal General QM definition (12 CFR 1026.43) was replaced by price-based thresholds in a CFPB rule issued in December 2020 (mandatory from October 1, 2022). Fannie Mae's Selling Guide (B3-6-02) sets a 36% maximum for manually underwritten loans, up to 45% with compensating factors, and up to 50% for loans underwritten through Desktop Underwriter.
• PMI, HOA dues and closing costs are not included. With less than 20% down, PMI will reduce the price you can afford; take it off the housing budget by lowering the front-end limit, or check the result in the mortgage payment calculator.
• The rate is fixed for the whole term and payments are monthly. Property tax is a flat percentage of the price; your area may assess it differently.
• This is an estimate for planning, not financial, tax or legal advice. What you can afford comfortably depends on savings, job stability and other costs a lender does not count.

Frequently asked questions