Home Affordability Calculator
Estimate how much home you can afford based on your income.
Home Affordability Calculator
Calculate how much house you can afford based on income, debts, and down payment.
Home Affordability Calculator
Determine your maximum affordable home price based on the 28/36 rule
Your total annual income before taxes
Car loans, student loans, credit cards (not utilities or groceries)
How much cash you have for down payment
Current mortgage interest rate
Typically 0.5-2.5% of home value (varies by location)
Enter your income and financial details to see how much house you can afford
Understanding Home Affordability
Home affordability isn't just about what a lender will approve - it's about what you can comfortably afford while maintaining financial stability. The traditional 28/36 rule states that housing costs shouldn't exceed 28% of gross monthly income, and total debt payments shouldn't exceed 36% of gross monthly income.
However, this calculator helps you see the full picture including property taxes, insurance, HOA fees, and potential PMI. Many first-time buyers focus only on the mortgage payment and get surprised by the total monthly cost. A realistic budget prevents buyer's remorse and financial stress.
The 28/36 Rule Explained
🏠 The 28% Front-End Ratio
Your housing expenses should not exceed 28% of gross monthly income:
- • Includes: Principal, interest, property taxes, insurance, HOA fees, PMI
- • Example: $6,000/month income = $1,680 maximum housing payment
- • This ensures you have enough for other expenses and savings
- • Conservative lenders may use 25% for extra safety
- • Leaves 72% of income for everything else
💳 The 36% Back-End Ratio
Total debt payments should not exceed 36% of gross monthly income:
- • Includes: All housing costs PLUS car loans, student loans, credit cards, personal loans
- • Example: $6,000/month income = $2,160 maximum total debt
- • If you have $500 in other debts, housing is limited to $1,660
- • Conventional mortgages typically require 36% or lower
- • FHA loans may allow up to 43% with compensating factors
📊 Why This Rule Matters
The 28/36 rule prevents financial overextension:
- • Based on decades of lending data and default rates
- • Ensures you can handle unexpected expenses and job loss
- • Allows for retirement savings, emergency fund building, and quality of life
- • Prevents being "house poor" - owning a home but unable to afford anything else
- • Most financially successful homeowners stay well below these limits
Hidden Homeownership Costs
Closing Costs (2-5% of Home Price)
Appraisal ($400-600), inspection ($300-500), origination fees (0.5-1% of loan), title insurance ($1,000-4,000), prepaid property taxes and insurance, recording fees, and attorney fees. On a $300,000 home, expect $6,000-15,000 in closing costs. Some can be negotiated or rolled into the loan.
Maintenance & Repairs (1-2% Annually)
Budget $3,000-6,000 per year for a $300,000 home. Includes HVAC repairs ($200-2,000), roof replacement ($5,000-15,000 every 20-30 years), appliance replacement, plumbing issues, lawn care, pest control, and general upkeep. Older homes require more; new construction less initially but similar long-term.
Utilities & Services (Often Higher Than Renting)
Electric, gas, water, sewer, trash, internet, and security typically cost $200-500/month depending on home size and climate. Homes are usually larger than apartments, leading to higher costs. Add lawn service ($100-200/month), pest control ($30-70/month), and pool maintenance ($80-150/month) if applicable.
PMI if Down Payment < 20%
Private Mortgage Insurance costs 0.5-1.5% of loan amount annually ($125-375/month on a $300,000 loan). Required when down payment is less than 20% to protect the lender. Can be removed once you reach 20% equity through payments or appreciation. FHA loans have mortgage insurance for life unless refinanced.
First-Time Homebuyer Strategies
Save 20% Down Payment
Avoid PMI, get better rates, lower monthly payments, and instant equity. Also demonstrates financial discipline to lenders.
Improve Credit Score
Each 20-point increase can lower your rate 0.25-0.5%, saving tens of thousands over 30 years. Pay down debts and fix errors first.
Get Pre-Approved Early
Know your budget before house hunting. Strengthens offers in competitive markets and identifies issues to fix before serious shopping.
Buy Below Your Max
Just because you qualify for $400K doesn't mean you should spend it. Buy at 70-80% of max to maintain financial flexibility and quality of life.
Frequently Asked Questions
How much house can I afford with my salary?
A safe rule of thumb is 2.5-3x your annual gross income. For example, with a $75,000 salary, target homes in the $187,500-$225,000 range. However, this varies based on your debt levels, down payment size, interest rates, and local property taxes. Someone with no other debts and a large down payment might safely afford 4x their income, while someone with student loans and car payments should stick to 2x. Use the 28/36 rule as your primary guide.
What debts are included in the debt-to-income ratio?
Include all recurring monthly debt payments: car loans, student loans, personal loans, credit card minimum payments, child support/alimony, and the proposed mortgage payment. Do NOT include: utilities, groceries, gas, insurance (except homeowners), phone bills, subscriptions, or irregular expenses. Lenders only care about legally obligated recurring debt that appears on your credit report. Pay off small debts before applying to improve your DTI ratio.
How much down payment do I really need?
Minimum down payments vary by loan type: 3-5% for conventional loans, 3.5% for FHA, 0% for VA and USDA loans. However, 20% is ideal to avoid PMI ($100-300/month), qualify for better rates, and build instant equity. With less than 20% down, you'll pay PMI until you reach 20% equity through payments or appreciation. Many buyers start with 5-10% down, accepting PMI as the cost of homeownership now rather than waiting years to save 20%.
Should I include closing costs in my home budget?
Yes - closing costs are separate from your down payment and typically run 2-5% of the home price ($6,000-15,000 on a $300,000 home). This covers appraisal, inspection, title insurance, origination fees, prepaid taxes/insurance, and recording fees. You can sometimes negotiate seller concessions to cover some costs or roll them into your loan (increasing the loan amount). Always budget for full closing costs plus moving expenses, furniture, and immediate repairs when determining affordability.
What if my income varies (self-employed, commission, bonuses)?
Lenders typically average 2 years of income for variable earners. If your income is trending up, recent higher earnings may not fully count yet. Self-employed borrowers need 2 years of tax returns showing consistent income. Commission and bonuses count if you have 2+ year history. Use your average or guaranteed base salary for conservative planning. Variable income earners should aim for lower DTI ratios (25% instead of 28%) and larger emergency funds (12 months instead of 6) since income fluctuates.
Is it better to buy a smaller home or stretch my budget?
Buy smaller. Being "house poor" - spending maximum DTI on housing with nothing left for savings, retirement, travel, or quality of life - creates financial stress and regret. A smaller home at 70-80% of your maximum allows you to save for retirement, build emergency funds, enjoy life, and handle unexpected expenses without panic. You can always upgrade later when income increases. Many people who stretch their budget end up refinancing, selling, or facing foreclosure when life happens (job loss, medical bills, divorce).
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