House Affordability Calculator

How Much House Can I Afford?

House Affordability Calculator

House Affordability Calculator will calculate the maximum house purchase you can afford based on either household income or debt estimates or fixed monthly budgets. They use slightly different approaches to estimate affordable house purchase.

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House affordability based on fixed, monthly budgets

This is a separate calculator used to estimate house affordability based on monthly allocations of a fixed amount for housing costs.

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📐 House Affordability Calculator Formulas

Understanding the mathematics behind home affordability calculations

🏠 The 28/36 Rule

Front-end Ratio = Housing Payment ÷ Gross Monthly Income ≤ 28%
Back-end Ratio = Total Debt ÷ Gross Monthly Income ≤ 36%

Industry standard for determining safe debt levels and housing affordability.

Example: $10,000 income × 28% = $2,800 max housing payment

💰 Maximum Loan Amount Formula

Loan Amount = PMT × [((1+r)^n - 1) ÷ (r×(1+r)^n)]

Where PMT = monthly payment, r = monthly interest rate, n = total payments

Variables: PMT = payment, r = annual rate ÷ 12, n = years × 12

🏡 House Price Calculation

House Price = Loan Amount ÷ (1 - Down Payment %)

Determines maximum affordable home price based on loan amount and down payment.

Example: $300,000 loan ÷ (1 - 20%) = $375,000 house price

📊 PITI Calculation

PITI = Principal + Interest + Taxes + Insurance

Total monthly housing payment including all major components.

Example: $1,500 + $300 + $400 + $150 = $2,350 PITI

📈 Property Tax Calculation

Monthly Property Tax = (House Price × Tax Rate) ÷ 12

Estimated monthly property tax based on home value and local tax rates.

Example: ($400,000 × 1.5%) ÷ 12 = $500/month

🛡️ Insurance & PMI

Monthly Insurance = (House Price × Insurance Rate) ÷ 12
PMI = (Loan Amount × PMI Rate) ÷ 12

Home insurance and PMI calculations for loans with less than 20% down.

PMI Required: When LTV > 80% (down payment < 20%)

🎯 Key Affordability Guidelines:

  • 28% Rule: Housing costs shouldn't exceed 28% of gross monthly income
  • 36% Rule: Total debt payments shouldn't exceed 36% of gross monthly income
  • Emergency Fund: Keep 3-6 months of expenses in savings after home purchase
  • Closing Costs: Budget 2-5% of home price for closing costs

💡 Loan Types & Requirements:

  • Conventional: 28/36 ratio, 3-5% down minimum
  • FHA Loan: 31/43 ratio, 3.5% down minimum
  • VA Loan: No down payment for eligible veterans
  • USDA Loan: 29/41 ratio, rural properties, no down payment

📋 Additional Considerations:

  • Credit Score: Higher scores get better rates (740+ ideal)
  • Debt-to-Income: Lower existing debts increase buying power
  • Employment History: 2+ years stable employment preferred
  • Cash Reserves: Lenders want to see savings after down payment