What is the 28/36 rule?

The 28/36 rule suggests that your mortgage payment should not exceed 28% of your gross monthly income, and your total debt (including the mortgage) should not exceed 36%.

How does a down payment affect affordability?

A larger down payment reduces the loan amount, which lowers your monthly payment and increases the home price you can afford.

What is Debt-to-Income (DTI) ratio?

DTI is the percentage of your gross monthly income that goes toward paying monthly debts. Lenders use this to assess your ability to manage monthly payments.

Can I buy a house with a 50% DTI?

While some programs like FHA allow for higher DTIs, most conventional lenders cap the back-end DTI at 43% to 45%.

Does my credit score affect affordability?

Yes, because your credit score determines your interest rate. A lower rate means a lower payment for the same loan amount.

What is "Front-End" vs "Back-End" DTI?

Front-end DTI is only your housing costs divided by income. Back-end DTI is ALL your monthly debts (car, student loans, cards) plus housing divided by income.

How much should I save for home maintenance?

A standard rule is to save 1% of your home's total value every year for ongoing maintenance and repairs.

What is Private Mortgage Insurance (PMI)?

PMI is a fee you pay to protect the lender if you put down less than 20%. It usually costs between 0.5% and 1.5% of the loan amount annually.

Can I include rental income in my affordability calculation?

Yes, if you are buying a multi-unit property and have a signed lease, most lenders will count a portion of that income toward your DTI.

How do interest rates affect my purchasing power?

A 1% rise in interest rates typically reduces the amount you can borrow by about 10% for the same monthly payment.

Home Affordability Calculator - Free Professional Tool | HomeCalc Pro

Introduction to Home Affordability Calculator

Plan your project with precision using our 2026 standardized calculator.

How to Use the Home Affordability Calculator

Step 1: Input Your Gross Annual Household Income: Enter the total pre-tax income for all borrowers on the loan. This should include base salary, consistent bonuses, commissions, and any secondary income sources like rental properties or dividends. Lenders base their lending limits on "gross" income, but we recommend you also consider your "net" take-home pay when making your final decision.
Step 2: List Your Recurring Monthly Debt Obligations: Accurately enter the minimum monthly payments for all your existing debts. This includes car loans, student loans, minimum credit card payments, and any alimony or child support. Do not include current rent or utility bills, as these will be replaced by your new mortgage and home ownership costs.
Step 3: Define Your Available Down Payment and Closing Costs: Input the total amount of cash you have available for the initial purchase. It is vital to subtract 3% to 5% from this total to cover "Closing Costs" (taxes, fees, and inspections), leaving the remainder for your actual down payment. A 20% down payment is ideal for the best rates and avoiding PMI, but our tool supports calculations for as little as 3% down.
Step 4: Set a Realistic Annual Interest Rate: Enter the expected interest rate for your mortgage. Since affordability is highly sensitive to rates—a 1% increase in rates can reduce your purchasing power by 10-12%—we recommend getting a pre-approval from a lender or checking the latest daily averages for your specific credit score tier.
Step 5: Factor in Local Taxes and Insurance Premiums: Estimate your annual property taxes and homeowner's insurance. If you are looking in high-tax states like New Jersey or Texas, these figures can drastically lower the home price you can afford for a given monthly payment. Use our "Advanced Options" to ensure these critical variables are included in your final affordability number.
Step 6: Review Your Affordability Tiers: Click calculate to see your results. Our tool provides three tiers: "Conservative" (best for lifestyle flexibility), "Moderate" (the standard bank limit), and "Aggressive" (the absolute maximum a lender might allow). We strongly recommend staying within the Conservative or Moderate ranges for long-term financial health.

Understanding Home Affordability

Lenders primarily use the Debt-to-Income (DTI) ratio to assess your creditworthiness and determine your maximum loan amount. There are two parts to this calculation: the "Front-End" ratio and the "Back-End" ratio. The Front-End DTI looks exclusively at your housing costs (PITI) as a percentage of your gross income. The Back-End DTI—which is the number lenders care about most—includes your housing costs plus all other recurring monthly debts. Most conventional lenders require a back-end DTI of 43% or lower. This means that if your household earns $10,000 per month, your total combined debt payments should ideally not exceed $4,300. By staying within these limits, you ensure you have a "safety margin" for life's other expenses, such as food, healthcare, and future savings goals.

It is also essential to account for the "Hidden Costs" of homeownership that aren't part of the mortgage. Beyond the principal and interest, you must budget for property taxes, which are assessed by your local government, and homeowner's insurance, which protects your asset from disasters. In many US regions, these two items alone can add $500 to $1,000 to your monthly bill. Furthermore, a professional budget includes a "Maintenance Sinking Fund"—usually 1% of the home's value per year—to handle inevitable repairs like a leaking roof or a broken HVAC system. Our affordability calculator is engineered to include these estimates, giving you a comprehensive view of what "affordability" truly looks like over a 30-year horizon. For instance, a $400,000 home in a low-tax state like Nevada may be more "affordable" than a $300,000 home in a high-tax state like Illinois once the total monthly spend is calculated.

Finally, we must emphasize the massive impact of the Down Payment on your long-term purchasing power. While it is possible to enter the market with as little as 3.5% down (FHA), providing a full 20% down payment accomplishes three critical goals: it secures a lower interest rate, it eliminates the need for monthly Private Mortgage Insurance (PMI), and it provides immediate "equity armor" against a potential market downturn. Saving for a larger down payment can often save you $200 to $400 per month in PMI and interest alone, which directly increases the maximum home price you can sustainably afford. Our tool allows you to simulate these different down payment levels, helping you find the "sweet spot" where your monthly payment meets your long-term wealth objectives.

Formula & Calculation Method

Affordability is calculated by determining the maximum allowable monthly payment based on your DTI and then solving for the loan principal.

Max Payment = (Gross Income × DTI) – Monthly Debts

Example Calculation:

With a $10,000 monthly income and a 36% DTI, your max total debt is $3,600. If you have $600 in other debts, your max mortgage payment is $3,000.

Tips for Accurate Results

1Eliminating a $400 car payment can often increase your purchasing power by $50,000 or more.
2A higher credit score qualifies you for lower rates, which increases the price you can afford.
3Remember to budget 2-5% of the home price for closing costs in addition to your down payment.
4Conservative buyers should aim for a 28-30% DTI to ensure plenty of "breathing room" in their budget.
5Don't forget about Homeowners Association (HOA) fees, which reduce your available mortgage budget.
6Save at least 1-2% of the home's value annually for a maintenance sinking fund.
7Check for local "First-Time Homebuyer Grants" that can help with your down payment or closing costs.
8Use a 15-year mortgage calculation to see how much faster you could build equity, even if it reduces your total home price.
9Always get a "Home Inspection" before finalizing a purchase; unexpected repairs can quickly make an affordable home unaffordable.
10Factor in your "Lifestyle Costs": if you love eating out and traveling, aim for a lower DTI than the bank allows.

Professional Affordability Strategy: Mastering Your Real Estate Budget

The most common mistake in real estate is asking a bank, "How much will you lend me?" rather than asking yourself, "How much should I spend?" Our home affordability calculator is engineered to help you answer that critical second question by providing a high-fidelity look at your total financial picture.

Cash-Flow Focus

We look beyond the loan to your actual monthly survival. Ensure your lifestyle isn't sacrificed for a mortgage.

Hidden Cost Audit

Our tool factors in the 1% maintenance rule, property taxes, and insurance for a true cost of ownership.

The Debt-to-Income (DTI) Limit: The Bank's Yardstick

Lenders live and die by the Debt-to-Income ratio. While the absolute maximum for many conventional programs is 43% to 45%, professional financial planners often recommend a "Total Debt" ratio of 36% or lower. This more conservative approach ensures that if you lose one source of income or face a major medical expense, your home remains secure. When using our calculator, we provide three distinct tiers—Conservative, Moderate, and Aggressive—to help you visualize how these different ratios impact your daily life and your long-term savings rate.

Property Taxes: The Variable That Can Break a Budget

Many homebuyers fall into the trap of looking at home prices in a vacuum. A $350,000 home in a rural area with low taxes may have the same monthly payment as a $275,000 home in a high-tax suburb. This "tax drag" is a permanent part of your monthly housing cost and is the primary reason why "sticker price" is a poor measure of affordability. Our calculator allows you to input localized tax rates so you can compare properties across different counties and states with actuarial precision.

PMI: The Cost of a Smaller Down Payment

If you are planning to put down less than 20%, you must account for Private Mortgage Insurance (PMI). This is an added monthly fee that protects the lender, but offers no benefit to you. While modern PMI rates are much lower than they used to be, it is still an "unproductive" expense. Our tool estimates this cost based on your down payment percentage, allowing you to see if waiting another six months to save a larger down payment might actually "pay for itself" by eliminating the PMI requirement and securing a lower interest rate.

The 1% Maintenance Rule: Budgeting for the Inevitable

A home is a living, breathing asset that requires constant upkeep. A professional real estate budget always includes a maintenance reserve. The industry standard is to set aside 1% of the home's total value every single year for repairs (e.g., $4,000 per year for a $400,000 home). While this isn't part of your mortgage payment, it is a mandatory part of "affordability." Our calculator includes this "hidden" cost in our conservative estimates to ensure your emergency fund stays healthy after you move in.

Frequently Asked Questions

Building a sustainable budget is the first step toward wealth. After calculating your affordability, explore these other free HomeCalcPro tools:

Mortgage Payment Calculator Mortgage Payoff Calculator Home Equity Calculator Savings Growth Calculator

Key Facts About Home Affordability

•Lenders generally prefer a DTI ratio below 43% for conventional loans.
•Your credit score significantly impacts the interest rate, which in turn affects how much you can afford.
•Include closing costs (typically 2-5% of home price) in your budget planning.
•Home affordability should account for maintenance and utility costs, not just the mortgage.
•A 1% increase in interest rates reduces your purchasing power by about 10%.
•Property taxes vary significantly by state and can change your affordable price by tens of thousands.
•The "Median Home Price" in the US has increased significantly faster than median wages over the last decade.
•Adjustable Rate Mortgages (ARMs) can increase affordability initially but carry the risk of rising payments later.
•Saving a larger down payment is often the most effective way to lower your long-term monthly housing costs.
•Lenders use your "Gross Income" (before taxes), which can sometimes lead to borrowing more than is comfortable for your "Net Pay."

Home Affordability Calculator