Affordability Summary
Maximum Affordable Home Price: –
Estimated Monthly Payment: –
Mortgage Breakdown: –
What is the Home Affordability Calculator?
The Home Affordability Calculator helps you determine how much house you can realistically afford based on your income, current debts, interest rate, loan term, down payment, and other financial considerations such as property taxes and insurance. This tool is ideal for first-time homebuyers, real estate planners, and individuals preparing for mortgage pre-approval.
How It Works: Formula & Methodology
Maximum Mortgage Payment = Gross Monthly Income × Max DTI − Existing Monthly Debts
Loan Amount = Mortgage Payment × [ (1 + r)^n − 1 ] ÷ [ r × (1 + r)^n ]
Total Home Price = Loan Amount + Down Payment
Monthly Payment = Principal & Interest + Property Taxes & Insurance
This calculator uses the commonly accepted back-end DTI (Debt-to-Income) ratio of 36% by default but allows customization. It considers your debt obligations and adjusts the maximum mortgage payment accordingly.
Example Calculation
Scenario: A buyer earns $5,000/month and has $500 in monthly debt, a $30,000 down payment, and is applying for a 30-year loan at 5% interest with 1.25% tax+insurance.
- Max mortgage payment = $5,000 × 0.36 − $500 = $1,300
- Affordable loan = approx. $220,000
- Total home price = $220,000 + $30,000 = $250,000
- Monthly payment = $1,300 + taxes/insurance
Use Cases
- 🔍 Pre-qualification planning before house hunting
- 🏡 First-time homebuyer affordability assessment
- 📊 Mortgage advisor financial screening
- 📝 Budget planning for real estate investments
- 📈 Financial coaching and affordability visualization
Frequently Asked Questions
How accurate is this home affordability calculator?
This calculator provides a good estimate based on DTI and loan terms but should not replace a lender's formal pre-approval process.
What is a good DTI ratio?
A back-end DTI of 36% or lower is typically acceptable for most lenders, while front-end ratios around 28% are also considered healthy.
Can I include rental income or bonuses?
Yes, if the income is consistent and documented, it may be included. Always consult your lender for accepted income sources.
What does the monthly payment include?
It includes the principal and interest (P&I) plus estimated property taxes and homeowner’s insurance if entered.
Does this work with different currencies?
Yes, you can select from common global currencies. All results update based on your selected symbol.
What if I plan to pay extra monthly?
This calculator does not currently account for prepayments or extra monthly contributions, but these can reduce your loan term and interest significantly.
Is a higher down payment always better?
Generally yes—it reduces your loan amount, lowers monthly payments, and increases your chances of loan approval.
Can I use this for investment properties?
Yes, but keep in mind lenders may apply stricter rules for non-owner-occupied properties.