Affordability Calculator

What is an affordability calculator?

An affordability calculator answers one question before you start touring houses: how much home your income and debts actually support. It takes your gross monthly income — the amount before taxes, retirement deferrals, and deductions — applies the two debt-to-income ratios underwriters use, and works backward through the amortization formula to the loan amount those ratios allow. Add your down payment cash and the result is a purchase price you can defend with arithmetic instead of optimism.

The two ratios are the front-end and back-end tests. The front-end ratio caps your total housing payment — principal, interest, property taxes, homeowners insurance, HOA dues, and mortgage insurance — at 28% of gross monthly income. The back-end ratio caps all of that plus your other monthly obligations — car loans, student loans, credit card minimums, personal loans, child support — at 36%. On $12,000 of gross monthly income the front-end ceiling is $3,360 and the back-end ceiling is $4,320, which leaves $960 a month of non-housing debt capacity.

Those two numbers are your own guardrails, not the loan ceiling a lender will publish. Lenders routinely approve back-end ratios of 43% to 50% for borrowers with strong credit, cash reserves, or low loan-to-value ratios: conventional loans backed by Fannie Mae and Freddie Mac can reach 50% DTI, FHA permits 50% with compensating factors, and VA lender overlays commonly sit at 41% to 43%. Qualifying at the maximum is not the same as affording it. At 43% on $12,000 of income, total monthly debt can reach $5,160 — $840 a month more than the 36% target. This calculator is built to hand you the payment you can hold through a slow year, not the largest number a lender will sign.

How to use this calculator

1. Enter your gross monthly income before taxes, including salary, documented bonuses, and any self-employment or rental income you can prove for two years.
2. Enter your existing monthly debt payments: car loan, student loans, credit card minimums, personal loans, and child support.
3. Enter the cash you have for a down payment and the interest rate you expect to pay. Current quotes are on the rates page.
4. Add estimated property taxes, homeowners insurance, HOA dues, and mortgage insurance when your down payment is under 20%.
5. Click Calculate to read your maximum housing payment, your maximum total debt, and the price range those two limits support.

A realistic input set: gross monthly income of $12,000 (a $144,000 household salary), existing debt of $600 made up of a $390 car payment, $150 of student loans, and $60 of credit card minimums, a down payment of $100,000, and a 6.50% rate on a 30-year term. For escrow, budget property tax at 0.9% to 1.2% of value a year — $375 to $500 a month on a $500,000 home — and homeowners insurance at $1,200 to $2,000 a year, which is $100 to $167 a month. If your down payment is under 20%, size the mortgage insurance line with the PMI calculator; premiums commonly run 0.5% to 1.5% of the loan amount a year, or about $167 to $500 a month on $400,000. With those inputs the calculator reports a $3,360 housing ceiling, a $4,320 total debt ceiling, and — after subtracting $600 of other debt from the back-end allowance, which still leaves $3,720 — a binding housing limit of $3,360.

How it is calculated

The calculator runs six steps in order. First it multiplies gross monthly income by 0.28 to get the maximum housing payment. Second it multiplies the same income by 0.36 to get the maximum total monthly debt. Third it subtracts your existing monthly debt from that back-end figure, which tells you how much of the 36% allowance is left for housing. Fourth it takes the smaller of the two housing numbers — that is the binding constraint, and on most files the 28% front-end rule binds first. Fifth it subtracts estimated property taxes, insurance, HOA dues, and PMI from that ceiling, because the lender counts them inside the 28%, leaving a maximum principal-and-interest payment. Sixth it inverts the standard amortization formula to convert that payment into a loan amount.

P = M × [ 1 − (1 + i) raised to −n ] ÷ i

Here P is the loan amount you can carry, M is the maximum principal-and-interest payment from step five, i is the monthly interest rate (annual rate ÷ 12), and n is the number of payments (360 on a 30-year loan).

Worked example: $12,000 monthly income, $600 of debt, $100,000 down

Step 1: $12,000 × 0.28 = $3,360 of allowed housing cost. Step 2: $12,000 × 0.36 = $4,320 of allowed total debt. Step 3: $4,320 − $600 of car, student loan, and card minimums = $3,720 available for housing under the back-end rule. Step 4: the binding limit is the smaller of $3,360 and $3,720, so $3,360 governs. Step 5: on a $540,500 home, property tax at 1.0% of value a year is $450.42 a month and homeowners insurance at $1,500 a year is $125.00, so $3,360.00 − $450.42 − $125.00 = $2,784.58 available for principal and interest.

Step 6: at 6.50% over 360 months, every $1 of monthly payment supports $158.21 of borrowing — the annuity factor, which is $400,000 ÷ $2,528.27. So $2,784.58 × 158.21 = about $440,500 of loan. Add the $100,000 down payment and the price point is $540,500. The check: a $440,500 loan pays $2,784.19 of principal and interest, plus $450.42 of tax and $125.00 of insurance is $3,359.61 — 28.0% of $12,000. Adding the $600 of other debt gives $3,959.61, which is 33.0% of income and comfortably under the 36% back-end cap. Note that property tax depends on the price you are solving for, so the calculator re-runs the loop with the tax the price implies until the two numbers agree; the single-pass answer of $440,560 settles at about $440,500 once tax is included.

Worked scenarios

Three inputs move the answer: your income, the price of the house, and the interest rate. Each table below holds the other two constant so you can read one change at a time.

Income scenarios: the 28/36 limits

Every additional $1,000 of gross monthly income adds exactly $280 of housing capacity under the front-end rule and $360 under the back-end rule. That is the arithmetic behind the advice to raise income before cutting the price: $2,000 more a month of documented income moves the housing ceiling from $3,360 to $3,920, which on a $400,000 loan at 6.50% is the difference between qualifying with room to spare and qualifying with none. Run your own figures through the debt-to-income calculator to see where you currently sit against both lines.

Price scenarios: 20% down, 6.50%, 30-year term

Each $100,000 of additional price adds about $589 to the monthly housing cost — $505.66 of principal and interest plus $83.33 of property tax at 1.0% of value — which requires roughly $2,104 more gross monthly income at the 28% rule. The gap between a $300,000 house and a $600,000 house is not a taste question once the ratios are applied: it is $6,311 a month of income, or $75,732 a year. The down payment calculator runs the cash-versus-payment side of the same decision.

Rate scenarios: $500,000 home, 20% down, 30-year term

Half a percent of rate is worth $130.07 a month on a $400,000 loan and $46,825 across 360 payments — and it moves the income you need to qualify by about $470 a month. On a fixed budget the same move cuts the loan you can carry from roughly $440,500 at 6.50% to about $418,500 at 7.00%, a reduction of roughly $22,000 in price. That is why rate shopping inside a single day, with three to five quotes taken together, is worth more than most of the negotiating most buyers do on the listing price.

Key details of how lenders read your file

• Front-end ratio (28%): housing only. On $12,000 of gross monthly income that is $3,360, and it must cover principal, interest, property taxes, homeowners insurance, HOA dues, and PMI — not just the loan payment.
• Back-end ratio (36%): everything. On the same income it is $4,320. Subtract $600 of car, student, and card payments and $3,720 remains for housing, so the 28% line still binds first.
• Lender ceilings of 43% to 50%: Fannie Mae and Freddie Mac permit up to 50% back-end DTI, FHA allows 50% with compensating factors such as reserves or a 620-plus score, and VA overlays usually stop at 41% to 43%. Approvals at the ceiling leave you no margin.
• Gross versus take-home: $12,000 a month gross lands around $9,000 to $10,000 after federal tax, FICA, and state tax depending on where you live. The mortgage still leaves from that second account, so run your budget on both numbers.
• Debts count at their minimum payment: credit cards are read at the minimum due, not the balance. A $9,000 card balance with a $270 minimum consumes $270 of your $4,320 back-end allowance whether you plan to pay it off next month or not.
• Property tax spread is wide: effective rates run from about 0.5% to over 2% of value a year. On a $500,000 home that is $208.33 a month at the low end and $833.33 at the high end — a $625 difference inside the same 28% cap.
• PMI below 20% down: typically 0.5% to 1.5% of the loan amount a year, so $167 to $500 a month on a $400,000 loan, all of which counts against the front-end ratio.
• Rate moves the ceiling: at a fixed $2,784.58 of principal-and-interest capacity, 6.50% buys about $440,500 of loan while 7.00% buys about $418,500 — the same payment, $22,000 less house.

Tips for 2026

1. Hold yourself to 28/36 even when the lender says 43 to 50. On $12,000 of monthly income, a 43% approval allows $5,160 of total debt while a 36% target allows $4,320. The $840 difference is your buffer for repairs, job gaps, and savings.
2. Shop every quote inside a 14-day window. Credit inquiries for the same loan type score as one when they occur inside a short window, so get three to five estimates on the same day rather than comparing Tuesday's quote against last month's flyer.
3. Pay down monthly debt before you apply. Retiring a $390 car payment lifts back-end headroom by $390 a month, which at 6.50% over 360 months converts into roughly $61,700 of additional borrowing power — more than most people negotiate off a listing price.
4. Budget the escrow lines before you fall for a price. Taxes and insurance on the $540,500 example total $575.42 a month, 17% of the $3,360 housing ceiling, and they are the two lines most likely to rise during ownership.
5. Keep a payment reserve of six months. Six months of the $3,360 housing payment is $20,160. Fund it before you attack anything else, because a reserve is what keeps a small income interruption from becoming a forced sale.
6. Re-run the calculation at every rate move. Rates change weekly; check the rates page and re-test your price point, because a quarter-point shift can move qualifying income by several hundred dollars a month.
7. Count only income you can document. Overtime, bonus, commission, and self-employment income need a two-year history and a stable trend. Lenders average the last two tax years, so an unverifiable raise does not exist until it appears on a pay stub for long enough.

Common mistakes when sizing affordability

• Running the math on take-home pay. Qualifying is done on gross income, but the payment leaves from net. A $144,000 salary that is quoted as $12,000 a month may deliver only $9,500, so a $3,360 housing payment is 35% of what actually hits the checking account, not 28%.
• Forgetting HOA and condo dues. Dues of $100 to $500 a month sit inside the 28% front-end ratio. On $12,000 of income, $350 of dues removes more than 10% of your housing ceiling before a dollar of mortgage is paid.
• Leaving maintenance out of the budget. Plan on 1% to 2% of home value a year — $417 to $833 a month on a $500,000 home. It is not part of the lender's ratio, which is exactly why it breaks buyer budgets in the first year.
• Shopping price before checking the ratios. Start from income: $12,000 a month with $600 of debt supports about $540,500 with $100,000 down at 6.50%. Browsing listings first anchors you to a number the arithmetic may not reach.
• Borrowing to the maximum approval. 43% back-end on $12,000 permits $5,160 of monthly debt against $4,320 at 36%. The extra $840 a month is not free money — it is the margin between a plan that survives an interruption and one that does not.
• Ignoring rate sensitivity. Moving from 6.50% to 7.00% cuts borrowing power at a fixed payment from about $440,500 to about $418,500. Buyers who lock a price without a rate contingency discover the gap at the loan estimate, not at the listing.

Frequently asked questions

What is the 28/36 rule? Housing costs at or below 28% of gross monthly income and total monthly debt at or below 36%. On $12,000 a month that is $3,360 for housing and $4,320 for everything combined. It is a self-imposed guardrail: lenders often approve 43% to 50%, but the lower target is what preserves margin.

How much house can I afford on $12,000 a month? At 28% you have $3,360 for housing. Subtract roughly $450 of property tax and $125 of insurance and about $2,785 remains for principal and interest, which supports a $440,500 loan at 6.50% — roughly $540,500 of price with $100,000 down and no other debt beyond the $600 already counted.

What is the highest debt-to-income ratio lenders accept? Conventional loans commonly reach 50% back-end with strong credit and reserves, FHA allows 50% with compensating factors, and VA overlays usually stop at 41% to 43%. Files above 43% typically need six months of payment reserves or a very strong credit profile.

Does this calculator include property taxes and insurance? Yes, because the 28% front-end ratio includes them. Budget property tax at 0.9% to 1.2% of value a year and insurance at $1,200 to $2,000 — on a $500,000 home that is $375 to $500 plus $100 to $167 a month before any mortgage is counted.

How does my down payment change the answer? 20% down on a $500,000 home means a $400,000 loan, a $2,528.27 principal-and-interest payment, and no PMI. At 5% down the loan is $475,000, the payment is $3,002.32, and PMI adds roughly $200 to $600 a month — about $674 more every month for the same house.

Should I buy at my maximum approval amount? No. A 43% back-end approval on $12,000 of income allows $5,160 of monthly debt, while a 36% target allows $4,320. Holding the lower number keeps $840 a month available for savings, repairs, and interruptions that will arrive eventually.

Do student loans and car payments count? Yes, at the minimum payment on your credit report, including income-driven student plans using their documented payment. $600 of such debt on $12,000 of income consumes $600 of the $4,320 back-end allowance and reduces the housing room under the back-end test to $3,720.

How does my credit score affect what I can afford? Credit does not change the 28/36 arithmetic, but it changes the rate you price at. A score of 760 and above earns the best conventional tiers, and on a $400,000 loan half a percent of rate is $130.07 a month and $46,825 across 360 payments — enough to shift your price point by tens of thousands.

Related calculators

• Debt-to-Income Calculator — check your front-end and back-end ratios
• Mortgage Calculator — full payment with taxes, insurance, and PMI
• Down Payment Calculator — cash down versus loan amount
• 30-Year Mortgage Calculator — amortization on the benchmark loan
• Mortgage Payoff Calculator — what extra payments do after you buy
• Refinance Calculator — when a lower rate is worth the closing costs