Affordability calculator

How it works

Affordability here is a payment cap turned into a price. Lenders look at how much of your gross monthly income would go to housing and to all debts together. This calculator uses two long-taught illustration ratios: housing costs at 28% of gross income (front-end) and total monthly debts at 36% (back-end). The tighter of those two leftover amounts is the housing budget. Taxes, insurance, PMI, and HOA dues are subtracted next. What remains is the principal-and-interest the loan can support. That P&I is inverted into a loan size, then grossed up by your down-payment percent to a maximum home price.

The 28/36 pair is an educational default, not a promise that a lender will stop there. The CFPB’s debt-to-income explainer defines DTI as monthly debt payments divided by gross monthly income and notes that mortgage DTI usually includes the projected housing payment. Ability-to-repay and qualified-mortgage requirements in 12 CFR 1026.43 use a different framework (including, in the current general QM, a price-based test rather than a single 43% DTI cap). Fannie Mae’s Selling Guide is the investor overlay many conventional loans must also satisfy, and those overlays can allow higher DTI with compensating factors — or lower DTI on a given file.

Other monthly debts in this tool are the recurring payments that would appear beside the new housing payment: auto loans, student loans, and revolving minimums as your lender counts them. Do not enter the new mortgage itself; the calculator builds that from the cap.

A price cap is not the same as a payment you will enjoy. Insurance, taxes, maintenance, and a reserve for repairs sit outside the 28/36 illustration. Use the mortgage calculator on a specific price to see the full monthly picture.

The formula

The binding constraint is whichever ratio produced the smaller housing budget. If other debts already exceed 36% of income, available housing is zero and the back-end ratio binds. Rounding is to the cent on the income and ratio steps so 28% of $10,000 is exactly $2,800.

G = annual income ÷ 12
front-end = 0.28 × G
back-end = 0.36 × G
housing = min(front-end, back-end − other debts)
available P&I = housing − taxes − insurance − PMI − HOA
loan P = M × (1 − (1 + r)^−n) / r
price = P / (1 − down-payment percent)

This inversion assumes a fixed-rate, fully amortizing loan and the extras you typed. It does not haircut income for taxes, retirement withholding, or child care.

Worked example

The donut shows the $2,800 housing budget against the $400 of other debts and the leftover share of gross income.

Raise other debts to $2,000 and the back-end leftover becomes $1,600, which is tighter than $2,800. The price cap falls because DTI, not the housing ratio, is now binding. That is the usual way car loans and student loans shrink buying power even when income is unchanged.

These results are the formula on the inputs above. They are not a statement of median prices, approval odds, or what any investor will accept this month.

Assumptions and limits

Ratios are fixed at 28 and 36. You cannot raise them in this UI, on purpose: the page is an illustration of a conservative classroom rule, not an underwriting engine. Manual underwriting, automated underwriting, FHA, VA, USDA, and portfolio loans use other tests.

Income is gross and unadjusted. Overtime, bonus, self-employment, and boarder income are subject to documentation rules this tool does not apply. Debts are whatever you type; a credit report may include obligations you omitted or exclude ones a lender will ignore.

Taxes, insurance, PMI, and HOA are user-supplied monthly dollars, not rates times price. In a real file those lines often scale with the home. If you raise the price, revisit those extras. Flood insurance and special assessments are omitted unless you fold them into insurance or HOA.

Down payment is a percent of the computed price. Closing costs, reserves, and gift-fund rules are not modeled. Putting less than 20% down may imply PMI; the CFPB PMI page explains why. Enter a PMI dollar amount if you want it inside the housing cap.

This estimate is not a pre-approval, not an offer, and not financial advice. A lender’s residual-income review (see 38 CFR 36.4340 for VA residual-income guidelines) or ability-to-repay review can decline a file that “fits” 28/36.

Frequently asked questions