How to use the mortgage affordability calculator
How much house applies lender-style limits to your income and debts. Borrowing capacity turns a monthly payment you choose into a loan amount.
The example starts with $120,000 of household income, $500 of other monthly debt payments and $60,000 saved for the down payment, at 6.5% over 30 years.
- Income. Gross income before tax, for every borrower on the application. Bonuses and self-employment income usually need a two-year history to count.
- Monthly debts. The minimum payments on your credit report plus any alimony or child support. Rent and utilities do not count.
- Down payment. Only the cash that goes toward the price; closing costs are paid separately.
- Rate, term, tax, insurance, HOA and PMI. Property tax is a percentage of the price, so it rises with the price. PMI applies only if the down payment ends up below 20% of the price.
- The two DTI limits. The defaults are the classic 28% and 36%. If a lender has quoted a higher back-end limit, enter it.
The chart shows how the maximum price moves with the interest rate while your payment budget stays the same.
How the maximum price is calculated
The calculator first finds the largest housing payment your income allows, then works back to the price that produces exactly that payment.
Back-end cap = Gross monthly income × Back-end limit − Other debt payments
Housing budget = the lower of the two capsThe housing payment includes principal and interest, property tax, home insurance, PMI and HOA fees: everything a lender counts as the cost of the home.
Because property tax and PMI depend on the price and the loan, the price is solved directly rather than guessed:
P = (Budget − Insurance ÷ 12 − HOA + D × (a + m)) ÷ (a + m + t)P is the home price, D the down payment, a the monthly principal and interest per dollar of loan, i(1 + i)n ÷ [(1 + i)n − 1], t the yearly property tax rate ÷ 12 and m the yearly PMI rate ÷ 12. When the down payment is at least 20% of the price, m is zero.
A worked example
Income of $120,000 is $10,000.00 a month before tax. The 28% front-end limit allows $2,800.00 for housing. The 36% back-end limit allows $3,100.00 once the $500 of other debts is subtracted. The front-end cap is lower, so it binds: the housing budget is $2,800.00.
At 6.5%, that budget carries a loan of $339,038. Add the $60,000 down payment and the maximum price is $399,038.
At that price the payment splits into $2,142.95 of principal and interest, $365.78 of property tax, $150.00 of insurance and $141.27 of PMI, because the down payment is only 15.0% of the price. All debts together then take 33.0% of gross income.
Which limit binds, and why it matters
The front-end ratio asks whether the house itself is affordable; the back-end ratio asks whether you can carry it on top of everything else you owe. With few other debts the front-end limit usually binds; as other payments grow, the back-end limit takes over.
Raise the other debts in the example to $1,200 a month and the back-end cap falls to $2,400.00, below the front-end cap. The binding limit switches to the back-end ratio and the maximum price drops to $346,778.
When the back-end limit binds, each $100 of monthly debt you clear adds $100 to the housing budget, which at 6.5% over 30 years supports roughly $15,800 more loan.
Higher DTI limits and what they cost you
Many loan programs accept a back-end ratio well above 36%. The table under the results reruns the example at three back-end limits, with only total debt counted:
| Back-end limit | Maximum home price |
|---|---|
| 36% | $438,233 |
| 43% | $529,688 |
| 50% | $621,144 |
Every extra point of a $10,000.00 monthly income is $100 more payment, so the price climbs fast. But the same take-home pay then has to cover a much larger mortgage: at 50%, half your gross income, and well over half of your net income, goes to debt before food, transport or savings.
What moves the answer most
| Change from the example | Maximum home price |
|---|---|
| The example | $399,038 |
| Interest rate 5.5% instead of 6.5% | $430,121 |
| Interest rate 7.5% instead of 6.5% | $371,694 |
| 15-year loan instead of 30 years | $318,353 |
| Property tax 2.2% instead of 1.1% | $356,359 |
| $300 a month of HOA fees | $359,843 |
The rate and the term matter most, because they set how much loan each dollar of payment carries. Property tax is the quiet one: in a high-tax county the same income buys noticeably less house. HOA fees count dollar for dollar against the budget, so high condo dues can cost as much borrowing power as a higher rate.
Borrowing capacity: start from the payment
At $2,000 a month, 6.5% and 30 years, you can borrow $316,422, and you will pay $403,578 in interest over the life of the loan. Each $100 of payment supports $15,821 of loan. Over 15 years the same payment borrows only $229,593, but the loan is gone in half the time. Tax, insurance and HOA fees come on top; the mortgage calculator shows the full payment.
What this calculator does not include
- Credit score and loan program rules. Real limits depend on credit, reserves, loan type and lender overlays. FHA and VA loans have their own rules and fees.
- Closing costs. These are paid in cash on top of the down payment. The down payment calculator estimates the total cash you need.
- Taxes on income. Lenders use gross income, but you pay from take-home pay, so a payment that meets the ratios can still feel tight.
- Maintenance and utilities. A common rule of thumb is to budget around 1% of the price a year for upkeep; older homes often need more.
Treat the result as the outer edge of what lenders are likely to approve, and check your own debt-to-income ratio and monthly budget before you set a price range.