How affordability is calculated
- Find the largest housing payment allowed: the lower of income × front-end ratio and income × back-end ratio − other debts.
- That payment must cover principal and interest on the loan, property tax and insurance.
- Solve for the home price where these costs exactly equal the allowed payment.
Here f is the monthly payment per $1 borrowed at your rate and term.
Beyond the lender’s numbers
- Closing costs typically run 2–5% of the price — budget for them separately from your down payment.
- Emergency fund: keep several months of expenses after closing.
- Maintenance: plan roughly 1% of the home’s value per year.
- Rate sensitivity: each 1% rise in rates reduces buying power by roughly 10%.
How to use the calculator
- Enter your gross annual income (before tax) and your other monthly debt payments.
- Enter your down payment, the expected interest rate and loan term.
- Enter estimated property tax and insurance rates and any HOA dues.
- Read the maximum home price, the loan amount and the monthly payment breakdown.
Payment limits by income (28/36 rule)
| Annual income | Max housing payment (28%) | Max total debt payments (36%) |
|---|---|---|
| $60,000 | $1,400 | $1,800 |
| $80,000 | $1,867 | $2,400 |
| $100,000 | $2,333 | $3,000 |
| $120,000 | $2,800 | $3,600 |
| $150,000 | $3,500 | $4,500 |
The housing payment includes principal, interest, property tax, homeowner’s insurance, mortgage insurance and HOA dues. The 36% limit includes the housing payment plus all other debts.
How interest rates change what you can afford
With a fixed budget of $2,000 a month for principal and interest on a 30-year loan, you can borrow about $372,563 at 5%, $333,583 at 6% and $300,615 at 7%. Each percentage point costs roughly 10% of buying power, which is why getting quotes from several lenders and improving your credit score before applying can make a big difference.
Upfront cash you’ll need
- Down payment: 3–3.5% minimum for many conventional and FHA loans, 0% for VA and USDA loans, 20% to avoid private mortgage insurance on conventional loans.
- Closing costs: typically 2–5% of the loan amount — lender fees, appraisal, title insurance, recording fees and prepaid taxes and insurance.
- Reserves: some lenders want two or more months of payments in savings after closing.
- Moving and setup: movers, furniture, immediate repairs and tools.
Ongoing costs beyond the mortgage
Plan for maintenance and repairs of about 1–2% of the home’s value per year, higher for older homes. Utilities are often higher than in an apartment, and property taxes and insurance premiums tend to rise over time. Some buyers apply a stricter personal rule — keeping all housing costs under 25% of take-home pay — to leave room for saving and other goals.