Home Affordability Calculator

How Much House Can You Afford?

Lenders use two key ratios to determine how much they'll lend you. These same ratios determine how much house you can realistically afford:

• Front-end ratio (housing ratio): Your total monthly housing costs (principal, interest, taxes, insurance — "PITI") should not exceed 28% of your gross monthly income. Some lenders allow up to 31%.
• Back-end ratio (debt-to-income ratio): Your total monthly debt payments — housing plus car payments, student loans, credit cards, etc. — should not exceed 36–43% of gross monthly income. FHA loans allow up to 50% DTI in some cases.

This calculator uses both rules to find the maximum home price that keeps you within the 28% front-end and 36% back-end limits. Your down payment is then added to the maximum loan amount to get your maximum purchase price.

The 28/36 Rule Explained

The 28/36 rule is the traditional conservative guideline for home buying. It states:

• Spend no more than 28% of gross monthly income on housing (PITI)
• Spend no more than 36% of gross monthly income on all debt combined

Example: $90,000 annual income = $7,500/month gross. Maximum PITI = $2,100/month (28%). If you have $400/month in existing debt payments, your housing allowance under the 36% total rule = $7,500 × 0.36 − $400 = $2,300/month. The lower of the two limits applies.

Modern lenders are often more flexible. Conventional loans (Fannie/Freddie) allow up to 45% DTI for well-qualified borrowers. FHA loans can go up to 50%. But just because a lender will approve you doesn't mean you should stretch that far — the 28/36 rule leaves room for savings, emergencies, and life changes.

Down Payment: What You Need to Know

Your down payment directly affects your loan amount, monthly payment, and whether you'll need Private Mortgage Insurance (PMI):

• Less than 20% down: PMI required on conventional loans — typically 0.5–1.5% of loan amount per year, added to your monthly payment. On a $300,000 loan, that's $125–$375/month extra.
• 20% down: No PMI. This is the traditional target for good reason — your effective rate is lower and your monthly payment drops substantially.
• 3% down (Fannie Mae HomeReady/Freddie Mac Home Possible): Available for first-time buyers. Low barrier but higher monthly cost due to PMI and larger loan.
• 3.5% down (FHA loan): Accessible for buyers with credit scores as low as 580. FHA mortgage insurance premiums are required for the life of the loan if you put less than 10% down.
• 0% down (VA, USDA loans): Available to eligible veterans (VA) and buyers in eligible rural areas (USDA). No PMI for VA loans.

Hidden Costs of Homeownership

Your mortgage payment (principal + interest) is just the start. Budget for these additional costs:

• Property taxes: Vary enormously by location — 0.3% of home value in Hawaii to 2.5%+ in New Jersey. On a $400,000 home in NJ, that's $10,000+/year.
• Homeowner's insurance: National average around $1,500–$2,000/year, much higher in hurricane/tornado zones.
• HOA fees: Can range from $100/month to $1,000+/month in high-end communities or condos.
• Maintenance: Budget 1–2% of home value per year. A $400,000 home = $4,000–$8,000/year in repairs and upkeep on average.
• Closing costs: 2–5% of purchase price. On a $350,000 home, expect $7,000–$17,500 at closing in addition to your down payment.
• Utilities: Heating, cooling, water, trash — typically $300–$700/month more than renting an apartment.

Buying vs. Renting: The Real Question

Buying is not always better than renting — it depends on how long you plan to stay. The general rule of thumb is that buying makes financial sense if you plan to stay at least 5–7 years. Shorter timelines often favor renting due to the transaction costs of buying and selling (agent commissions + closing costs can eat 8–10% of the home value).

Key factors that favor buying: rising rent, stable income, long time horizon, desire to build equity, low-rate environment. Factors that favor renting: job uncertainty, possible relocation, high local price-to-rent ratios (above 20:1 strongly favors renting), falling home prices.

Frequently Asked Questions

How much house can I afford on a $100,000 salary? Using the 28% front-end rule: $100,000/12 × 0.28 = $2,333/month for PITI. At 7% interest on a 30-year loan with a $30,000 down payment, that supports a home around $310,000–$340,000 depending on taxes and insurance in your area.

What credit score do I need to buy a house? Conventional loans typically require a 620+ credit score. FHA loans accept 580+ (with 3.5% down) or even 500–579 (with 10% down). VA loans have no minimum score per VA guidelines, but lenders often require 620. Better scores get better rates — a 760+ score vs. 680 can save 0.5–0.75% on your rate.

How much do I need saved before buying a home? At minimum: down payment + closing costs (2–5% of purchase price) + 3–6 months emergency fund. For a $350,000 home with 5% down: $17,500 down + ~$10,000 closing costs + emergency fund. Plan on having $35,000–$50,000 liquid before buying.

What is PMI and can I avoid it? Private Mortgage Insurance protects the lender if you default. It's required when you put less than 20% down on a conventional loan. You can avoid it by: putting 20% down, taking a piggyback second loan (80-10-10), or using a lender-paid PMI option (slightly higher rate but no separate PMI payment).