Home Affordability Calculator
Calculate the maximum home price you can afford based on your income and financial situation. Plan your home purchase accordingly.
How to Use the Home Affordability Calculator
- Enter your annual income: Include your gross annual salary before taxes and deductions.
- Add monthly debts: Include car loans, student loans, credit cards, and other recurring monthly obligations.
- Specify down payment: Enter how much money you have saved for a down payment.
- Set interest rate: Use current mortgage rates or the rate you expect to qualify for.
- Add property details: Include estimated property tax rate, annual home insurance, and HOA fees if applicable.
Frequently Asked Questions
What percentage of income should go toward housing?
Financial advisors typically recommend spending no more than 28% of gross monthly income on housing costs. This guideline helps maintain financial flexibility for other expenses, savings, and unexpected costs.
How much down payment do I need?
While 20% down remains ideal for avoiding PMI and securing better rates, many buyers start with 3% to 5% down on conventional loans or 3.5% on FHA loans. Larger down payments reduce monthly costs and total interest paid.
Should I get pre-approved before house hunting?
Yes, pre-approval gives you an accurate budget, strengthens your negotiating position, and speeds up closing once you find a home. Sellers take pre-approved buyers more seriously than those without verified financing.
How do interest rates affect what I can afford?
Interest rates directly impact monthly payments. Each 1% rate increase reduces buying power by roughly 10%. A buyer qualifying for $400,000 at 6% interest might only afford $365,000 at 7% interest with the same payment.
Understanding Home Affordability
Determining how much house you can afford involves more than just looking at home prices. Lenders use specific formulas and ratios to evaluate your ability to repay a mortgage while maintaining financial stability. The primary factors include your income, existing debts, down payment amount, credit score, and current interest rates.
The 28/36 Rule
Most lenders follow the 28/36 rule when evaluating mortgage applications. The first number means your housing expenses should not exceed 28% of your gross monthly income. Housing expenses include principal, interest, property taxes, insurance, and HOA fees. The second number means your total debt payments, including housing costs plus car loans, student loans, and credit card payments, should stay below 36% of your gross monthly income.
These percentages represent debt-to-income ratios that lenders consider safe. Staying within these limits helps ensure you can afford your mortgage payment while maintaining other financial obligations and building savings. Some lenders may approve higher ratios with compensating factors like excellent credit scores or large down payments, but the 28/36 rule provides a solid guideline for most buyers.
Components of Your Monthly Payment
Your total monthly housing payment includes several components beyond just principal and interest. Property taxes vary significantly by location, typically ranging from 0.5% to 2.5% of home value annually. Homeowners insurance protects your investment and usually costs between $800 and $2,000 per year depending on location and coverage. Private mortgage insurance (PMI) applies when your down payment is less than 20% of the purchase price, adding 0.5% to 1% of the loan amount annually.
Hidden Costs of Homeownership
Calculate affordability with a realistic view of all homeownership costs. Beyond mortgage payments, budget for regular maintenance, typically 1% to 2% of home value annually. Utilities usually cost more in a house than an apartment. Budget for lawn care, snow removal in cold climates, and periodic repairs like roof replacement or HVAC maintenance.
Key Factors That Affect Home Affordability
Income & Employment
Lenders verify stable income through pay stubs, tax returns, and employment history. Higher income increases buying power, while irregular income may require larger down payments or reserves.
Existing Debts
Car loans, student loans, credit cards, and other monthly obligations reduce how much you can borrow. Paying down debt before buying increases affordability significantly.
Credit Score
Higher credit scores qualify for better interest rates, reducing monthly payments. Scores above 740 typically receive the best rates, while scores below 620 may face challenges qualifying.
Location & Property Taxes
Property tax rates vary by location, impacting monthly payments substantially. High-tax areas reduce how much home you can afford compared to low-tax regions with the same income.
Related Calculators
Mortgage Calculator
Calculate mortgage payments, total interest costs, and amortization schedules. Get accurate estimates for home mortgages with different terms.
Paycheck Calculator
Calculate your take-home pay after federal taxes, state taxes, FICA, and deductions. Free paycheck calculator shows net pay, tax withholdings, and annual income breakdown.
Loan Calculator
Calculate loan payments based on loan amount, interest rate, and term. Get accurate estimates for personal loans and other borrowing.