Affordability Calculator

How to Calculate Mortgage House Affordability

Calculating how much house you can afford starts with understanding your complete financial picture – income, debts, interest rate, loan term, taxes, insurance, and down payment. Lenders use these factors to estimate how large a monthly mortgage payment you can comfortably manage.

Our calculator does this automatically by looking at two key limits:

1. How much of your income can safely go toward housing costs
2. How much total debt (housing + other monthly debts) your income can support

By entering your income, debts, target interest rate, down payment, and your estimated tax/insurance rates, the calculator reveals a realistic home-price range and shows how each loan type (Conventional, FHA, VA, USDA) changes your affordability.

The Mortgage House Affordability Formula

Here’s a simplified view of how affordability is calculated:

1. Determine your gross monthly income

Gross monthly income = Annual household income ÷ 12

2. Apply lender-accepted DTI (Debt-to-Income) ratios

Each loan type uses its own guidelines:

• Conventional: ~28% front-end / 45% back-end
• FHA: ~31% front-end / 43% back-end
• VA: Primarily back-end (around 41%)
• USDA: ~29% front-end / 41% back-end

Front-end DTI = (Housing costs ÷ Gross monthly income)
Back-end DTI = (Housing + all monthly debts ÷ Gross monthly income)

3. Estimate maximum allowable housing payment

Max housing payment = min(front-end limit, back-end limit)

4. Back into the loan amount

Using the interest rate, loan term, and max housing payment:

Loan amount ≈ Present value of the allowed monthly P&I payment

5. Add your down payment

Max home price = Loan amount + Down payment

Our calculator performs these steps instantly and compares four loan types side-by-side.

Mortgage House Affordability – Key Terms Explained

• Gross Monthly Income
Your total income before taxes from all borrowers applying for the mortgage.

• Debt-to-Income Ratio (DTI)
The percentage of your income spent on housing costs (front-end) and housing + all other debts (back-end). Lenders use this to determine safe payment levels.

• Down Payment
Cash you contribute upfront. Higher down payments reduce your loan amount and may eliminate mortgage insurance.

• Principal & Interest (P&I)
The core mortgage payment that repays your loan over time.

• Property Taxes & Homeowners Insurance
Recurring costs that affect your monthly payment. These vary widely by state and county.

• Mortgage Insurance / Funding Fees
Additional costs depending on loan type:

• Conventional PMI (if down < 20%)
• FHA MIP (annual + upfront)
• VA funding fee
• USDA guarantee fee

• Loan Term
Most U.S. buyers choose a 30-year fixed-rate mortgage; shorter terms increase the payment but reduce interest.

• Maximum Affordable Home Price
The purchase price that keeps your mortgage payment and total debts within safe limits based on your income.

How Much House Can You Afford With Your Salary?

Here are some general affordability examples based on the common 28/36 DTI guideline, assuming average taxes and insurance:

$60,000 salary (~$5,000/month)

• Max housing budget: ≈ $1,400/month
• Typical home price range: $200,000–$280,000 depending on loan type & down payment.

$100,000 salary (~$8,333/month)

• Max housing budget: ≈ $2,300/month
• Typical home price range: $350,000–$450,000

$150,000 salary (~$12,500/month)

• Max housing budget: ≈ $3,500/month
• Typical home price range: $500,000–$750,000

Your actual results depend heavily on:

• Your down payment
• Local taxes & insurance
• Existing debts
• Loan type (Conventional vs FHA vs VA vs USDA)
• Credit score and rate

Use the calculator above to get a personalized number based on your exact inputs.

Frequently Asked Questions (FAQs)