Quick Summary
A guide to home affordability calculations - the 28/36 rule, how lenders determine your maximum, and why affordable on paper doesn't always mean comfortable in practice.
The bank says you can afford $420,000. Your gut says maybe $350,000. Your partner says $380,000. Everybody is using different math, and nobody is necessarily wrong - they are just measuring different things.
The bank measures risk to itself. Your gut measures monthly comfort. A calculator can measure both and show you exactly where the gap is.
The Home Affordability Calculator estimates your comfortable range based on income, debts, and down payment. No signup required.
What the Bank Sees vs. What You Live
Lenders use the 28/36 rule as a starting point:
- Housing costs (mortgage, taxes, insurance) should not exceed 28% of gross monthly income
- Total debt payments (housing plus car, student loans, credit cards) should not exceed 36% of gross monthly income
On a $90,000 salary - $7,500/month gross:
If you carry $400/month in other debt, housing tops out at $2,300.
Here is the thing: some lenders approve loans at 43% or even 50% debt-to-income ratios. Getting approved for $400,000 does not mean a $400,000 mortgage fits your life. The lender’s model does not know about your childcare costs, retirement contributions, travel habits, or the fact that you eat out four nights a week and have no intention of stopping.
Many financial planning approaches suggest 25% of gross income for total housing costs instead of 28%. On $7,500/month, that is $1,875 rather than $2,100. A modest monthly difference, but it preserves flexibility for everything else.
From Payment to Price Tag
Working backward from a monthly payment to a purchase price:
Starting point: $2,100/month maximum housing cost.
Subtract property taxes ($300/month estimate) and homeowner’s insurance ($150/month). That leaves $1,650 for mortgage principal and interest.
At 6.5% interest on a 30-year term, $1,650/month supports a loan of about $261,000. With 20% down, the purchase price comes to roughly $326,000. With 10% down, it drops to about $290,000 because PMI costs eat into the available payment.
The calculator runs this arithmetic instantly for different scenarios. But understanding how payment converts to price helps when evaluating listings on the fly.
The Costs That Are Not the Mortgage
Comparing a mortgage payment to current rent is one of the most common mistakes in home buying. The mortgage is one line item:
| Cost | Typical Monthly Range |
|---|---|
| Mortgage (principal + interest) | Varies |
| Property taxes | $200 - $800+ |
| Homeowner’s insurance | $100 - $300+ |
| PMI (if less than 20% down) | $100 - $300 |
| Maintenance and repairs | ~1% of home value per year |
| HOA fees | $0 - $500+ |
| Higher utilities vs. renting | $100 - $300 |
A $300,000 home with a $1,650 mortgage payment has a true monthly cost closer to $2,500-$3,000. That maintenance line - about $250/month on a $300,000 home - catches many new homeowners off guard. Roofs, water heaters, HVAC systems, and appliances do not break on a schedule, but they do break.
The Down Payment Trade-Off
On a $350,000 home at 6.5% for 30 years:
| Down Payment | Cash Needed | Monthly P&I | PMI | Total Monthly |
|---|---|---|---|---|
| 5% ($17,500) | $17,500 | $2,102 | ~$175 | $2,277 |
| 10% ($35,000) | $35,000 | $1,991 | ~$130 | $2,121 |
| 20% ($70,000) | $70,000 | $1,770 | $0 | $1,770 |
Going from 5% to 20% down saves $507/month - over $180,000 in reduced payments and eliminated PMI across the loan. But producing an extra $52,500 in cash takes time. Time during which home prices, interest rates, and rent all keep moving.
There is no universally correct answer here. Waiting to save 20% makes financial sense on paper but may not in a rising market with rising rents. Buying sooner with less down costs more monthly but locks in the purchase. The calculator helps quantify both sides so the decision becomes clearer.
The Down Payment Calculator estimates how long it takes to reach your target based on current savings rate.
Running Your Own Scenario
The manual process, if you want to understand the mechanics:
- Start with gross monthly income
- Multiply by 0.25 to 0.28 for a comfortable housing range
- Subtract estimated property taxes, insurance, and PMI (if applicable)
- The remainder is your maximum mortgage payment
- Convert that payment to a loan amount at current interest rates
- Add your down payment to get a maximum purchase price
Or skip the arithmetic and test scenarios in the calculator.
For seeing how a mortgage payment fits alongside every other monthly expense, the Monthly Budget Template shows housing costs in the context of the full picture. That context is where most people realize whether a number is genuinely comfortable or just technically possible.
More on Housing & Mortgages
- Down Payment Calculator: How Much to Save for a Home - How much to target, the tradeoffs of different percentages, and building a savings plan
- Rent vs. Buy Calculator: The Real Comparison - The full cost comparison between renting and buying, including opportunity cost
- Mortgage Payoff Calculator: Extra Payments Impact - How extra payments shorten your loan term and save on interest
- Mortgage Refinance Calculator: When Does Refinancing Make Sense? - The breakeven calculation for swapping to a lower rate