How to Calculate Mortgage House Affordability
Determining how much house you can afford requires evaluating your total financial picture:
income, debts, interest rate, loan term, taxes, insurance, and available down payment.
Most lenders use the calculation below to qualify borrowers:
1. Determine your gross monthly income
Gross monthly income = Annual household income ÷ 12
2. Apply debt-to-income (DTI) ratios
Lenders set maximum DTI limits to ensure you can safely manage monthly payments.
Typical maximum DTI limits:
- Conventional loans: 45%–50%
- FHA: Up to 56.9%
- VA: No fixed limit, but lenders prefer ≤ 41%
- Jumbo loans: Usually ≤ 43%
3. Estimate your maximum allowable housing payment
Maximum housing payment = Gross monthly income × (Allowed DTI %)
4. Subtract your non-mortgage debt
Your existing debts (credit cards, auto loans, student loans, etc.) reduce what you can spend on housing.
Housing budget = (Allowed monthly debt limit – monthly non-mortgage debt)
5. Add your down payment
Your down payment directly increases your buying power.
Max home price = Loan amount + down payment
This calculator automates all of the above to give you an accurate estimate instantly.
Mortgage House Affordability – Key Terms Explained
Gross Monthly Income
Your total income before taxes and deductions.
Debt-to-Income Ratio (DTI)
The percentage of monthly income used to pay debts.
Lower DTI = more room for a mortgage.
Down Payment
Cash paid upfront. Larger down payments reduce your loan amount and mortgage insurance costs.
Mortgage Interest Rate
Your interest rate dramatically affects affordability.
Even a 1% change can shift your home price range by tens of thousands.
Property Taxes & Insurance
Ongoing costs included in your monthly housing payment.
Loan Term
Most homebuyers choose a 30-year term for lower payments; 15-year loans offer lower interest costs.
How Much House Can You Afford With Your Salary?
Here are sample affordability estimates based on typical DTI limits and average interest rates:
$50,000 salary (~$4,166/mo)
Estimated home budget: $150,000–$220,000
$75,000 salary (~$6,250/mo)
Estimated home budget: $230,000–$330,000
$100,000 salary (~$8,333/mo)
Estimated home budget: $330,000–$450,000
$150,000 salary (~$12,500/mo)
Estimated home budget: $500,000–$700,000
Actual affordability varies based on interest rate, down payment, and local taxes. For precise numbers, use the calculator above.
Frequently Asked Questions (FAQs)
What DTI ratio should I aim for?
Most borrowers qualify with a total DTI between 36% and 45%. FHA allows higher ratios, while jumbo loans usually require lower DTIs.
How much should I put down?
A 20% down payment avoids mortgage insurance, but many borrowers buy with:
3% (Conventional)
3.5% (FHA)
0% (VA)
Your down payment should balance affordability, savings, and cash reserves.
Does my credit score affect how much I can afford?
Yes. Better credit scores qualify you for lower interest rates, which increases your buying power.
Should I borrow the maximum amount I’m approved for?
Not always. Lenders approve based on risk guidelines, but only you know your budget comfort level. Consider savings goals, lifestyle costs, and emergency funds.
What other costs should I plan for?
Expect closing costs (2%–5% of purchase price), homeowners insurance, maintenance, utilities, and taxes.