Mortgage Affordability Calculator

Lenders evaluate two DTI ratios simultaneously, and the more restrictive one determines your maximum loan.

The front-end ratio (also called the housing expense ratio) includes only housing costs — mortgage principal, interest, property taxes, and homeowner's insurance (PITI) — divided by gross monthly income. The standard limit is 28%.

The back-end ratio includes housing costs plus all recurring debt payments — car loans, student loans, credit card minimums, personal loans, and child support — divided by gross monthly income. The standard limit is 36%.

For someone earning $8,333 per month with $500 in monthly debts: the front-end allows $2,333 for housing, while the back-end allows $3,000 total minus $500 debts equals $2,500 for housing. The front-end limit of $2,333 is more restrictive, so it controls.

Some lenders, especially for FHA loans, allow up to 31% front-end and 43% back-end.

Mortgage interest rates have an outsized impact on affordability. Each 1% increase in rate reduces buying power by approximately 10-11%.

At 5% interest, a $2,000 monthly payment supports a $373,000 loan. At 6%, the same payment supports only $333,000 — a $40,000 reduction. At 7%, it drops to $300,000. When rates rose from 3% to 7% between 2021 and 2023, buyers lost roughly 35% of their purchasing power.

Down payment percentage affects affordability differently: a larger down payment does not change your DTI ratios (the monthly payment budget stays the same), but it reduces the loan-to-value ratio, meaning the same monthly payment supports a higher home price. Going from 10% to 20% down effectively lets you buy about 11% more house.

Additionally, 20% down eliminates Private Mortgage Insurance (PMI), saving $100-$300 per month that can go toward a larger mortgage payment.

Four primary strategies expand your buying power.

• First, increase income — a $10,000 salary increase adds approximately $35,000-$40,000 in maximum home price (depending on rate and term).
• Second, reduce existing debts — eliminating a $400 monthly car payment can add $60,000-$80,000 to your maximum home price by improving the back-end ratio.
• Third, save a larger down payment — this lets you buy a pricier home within the same monthly budget.
• Fourth, secure a lower interest rate through improving your credit score (each 20-point increase can drop rates 0.125-0.25%), paying discount points (each point costs 1% of loan amount and lowers rate by 0.25%), or choosing an adjustable-rate mortgage (ARM) with a lower initial rate.

Beyond the 28/36 rule, consider your personal comfort level — many financial advisors suggest keeping housing costs at 25% or less of take-home pay for a more conservative budget.

Affordability is driven by income, debts, down payment, and rate — anchored by the 28/36 rule.

On a $100,000 income (about $8,333 gross monthly), the front-end limit is 28% ($2,333 for housing) and the back-end limit is 36% ($3,000 for total debt), per Consumer Financial Protection Bureau guidelines.

Your maximum home price is whatever loan those limits support at current rates plus your down payment. This calculator solves for that price from your inputs.

Lenders judge affordability with two debt-to-income ratios.

Front-end DTI is housing costs (principal, interest, taxes, insurance) divided by gross monthly income — the 28% target.

Back-end DTI adds all other debt (car loans, student loans, credit cards) — the 36% target, though many loans allow higher. The CFPB notes back-end DTI is the more decisive figure in underwriting.

Lowering existing debt directly raises the home price you qualify for.

A larger down payment raises your maximum purchase price two ways:

• it adds directly to the price you can pay
• by lowering the loan it reduces the monthly payment, freeing room under the DTI limits

Putting 20% down also avoids private mortgage insurance, whose cost otherwise counts against your housing budget. Freddie Mac notes down payment and DTI together largely determine loan qualification.

Interest rates strongly affect how much house you can afford, because a higher rate means a larger share of each payment goes to interest, shrinking the loan your DTI limit supports.

A one-percentage-point rate increase can cut buying power by roughly 10%. This is why affordability falls when rates rise even if your income is unchanged.

Model the current rate, not an outdated one, when estimating your maximum price.

The 28% housing limit covers full PITI — principal, interest, taxes, and insurance — not just the loan payment.

High property-tax areas and expensive homeowners insurance leave less room for principal and interest, lowering the price you qualify for. HOA dues count too.

Two identical incomes can afford very different homes depending on local tax and insurance costs, which is why this calculator includes tax and insurance rates.

Pre-qualification is a quick, informal estimate; pre-approval involves the lender verifying income, assets, and credit, producing a reliable maximum and a stronger offer.

The CFPB recommends getting pre-approved before house hunting so you shop in your real price range and can act fast. A pre-approval also surfaces credit issues early.

Note the pre-approval amount is a ceiling, not a target — borrowing the maximum is rarely wise.

Qualifying for a loan is not the same as being able to live comfortably with it. Lender DTI limits ignore retirement savings, childcare, and lifestyle costs.

Buying below your maximum leaves a cushion for emergencies, rate resets, and life changes, and avoids becoming 'house poor.'

Financial educators recommend targeting a housing payment closer to 25% of take-home pay rather than the 28% of gross income lenders allow.

Frequent mistakes include:

• budgeting off the loan payment while ignoring taxes, insurance, and HOA
• borrowing the full pre-approval amount
• forgetting closing costs and maintenance
• using an outdated interest rate
• not paying down debt first to improve back-end DTI

Base the budget on full PITI, keep a cushion below the maximum, reduce debts before applying, and model the current rate for a realistic maximum price.