Mortgage Affordability Calculator
Calculate how much house you can afford based on income, debts, and the 28/36 rule.
=monthly_income * 0.28 How It Works
The 28/36 rule is a standard guideline lenders use to determine mortgage affordability:
- 28% Rule: Your monthly housing costs shouldn’t exceed 28% of gross monthly income
- 36% Rule: Your total debt payments shouldn’t exceed 36% of gross monthly income
The Formulas
Maximum Housing Payment (28% Rule):
=monthly_gross_income * 0.28Maximum Total Debt (36% Rule):
=monthly_gross_income * 0.36Available for Housing (after other debts):
=(monthly_income * 0.36) - other_monthly_debtsExample
Your Situation:
- Annual Income: $85,000
- Monthly Gross: $7,083
- Car Payment: $450
- Student Loans: $300
- Credit Cards: $150
28% Rule (Housing Only):
=$7,083 * 0.28 = $1,983/month max housing36% Rule (All Debt):
=$7,083 * 0.36 = $2,550/month max total debt
Current other debts: $900
Available for housing: $2,550 - $900 = $1,650/monthYour limiting factor is $1,650/month - the lower of the two calculations.
Building a Home Affordability Calculator
| Input | Value |
|---|---|
| Annual Gross Income | $85,000 |
| Monthly Gross Income | =B1/12 |
| Other Monthly Debts | $900 |
| Interest Rate | 7.0% |
| Loan Term (Years) | 30 |
| Down Payment % | 20% |
| Property Tax Rate | 1.2% |
| Insurance (Annual) | $1,500 |
| Output | Formula |
|---|---|
| Max Housing (28%) | =B2*0.28 |
| Max Total Debt (36%) | =B2*0.36 |
| Available for Housing | =B10-B3 |
| Limiting Payment | =MIN(B9, B11) |
| Est. Tax + Insurance/Mo | =(estimated_home*B6/12)+(B7/12) |
| Available for P&I | =B12-B13 |
| Max Loan Amount | =PV(B4/12, B5*12, -B14) |
| Max Home Price | =B15/(1-B6) |
From Payment to Home Price
Once you know your max monthly payment, calculate the home price:
Step 1: Estimate Non-Mortgage Costs
=home_price * (tax_rate + insurance_rate) / 12Rule of thumb: ~1.5-2% of home value annually for taxes + insurance.
Step 2: Available for Principal & Interest
=max_payment - estimated_tax_insurance - HOA - PMIStep 3: Maximum Loan Amount
=PV(rate/12, years*12, -monthly_PI_payment)Step 4: Maximum Home Price
=max_loan / (1 - down_payment_percent)Quick Reference Table
| Annual Income | Max Monthly (28%) | ~Home Price (20% down, 7%) |
|---|---|---|
| $50,000 | $1,167 | ~$175,000 |
| $75,000 | $1,750 | ~$260,000 |
| $100,000 | $2,333 | ~$350,000 |
| $125,000 | $2,917 | ~$435,000 |
| $150,000 | $3,500 | ~$520,000 |
Assumes minimal other debt, 1.5% for taxes/insurance
DTI Impact on Approval
| Front-End DTI | Back-End DTI | Typical Result |
|---|---|---|
| <28% | <36% | Easy approval |
| 28-31% | 36-43% | Possible with good credit |
| 31-33% | 43-45% | Requires excellent credit |
| >33% | >45% | Difficult to qualify |
Some loan programs (FHA, VA) allow higher ratios with compensating factors.
What’s Included in “Housing Costs”
The 28% includes your total PITI:
- Principal (loan repayment)
- Interest (cost of borrowing)
- Taxes (property taxes)
- Insurance (homeowners insurance)
Plus:
- PMI (if down payment < 20%)
- HOA fees (if applicable)
Affordability by Interest Rate
Same $100K income, 20% down, how rates affect buying power:
| Interest Rate | Max Home Price | Monthly Payment |
|---|---|---|
| 5% | $420,000 | $2,333 |
| 6% | $375,000 | $2,333 |
| 7% | $340,000 | $2,333 |
| 8% | $310,000 | $2,333 |
Every 1% rate increase reduces buying power by ~10%.
Conservative vs. Aggressive
| Approach | Housing % | Why |
|---|---|---|
| Conservative | 20-25% | More savings, flexibility |
| Standard | 28% | Traditional guideline |
| Stretch | 30-33% | Possible with stable income |
| Maximum | 35%+ | High risk, lender may allow |
Consider staying below 28% if:
- Income is variable
- Job security is uncertain
- You want to save aggressively
- Planning major expenses (kids, education)
The True Cost Comparison
Don’t forget ongoing costs when calculating affordability:
| Expense | Annual Estimate |
|---|---|
| Property Taxes | 0.5-2.5% of home value |
| Insurance | 0.3-1% of home value |
| Maintenance | 1-2% of home value |
| Utilities | Varies by size/location |
| HOA | $0-$500+/month |
A $400K home might cost $8,000-$16,000/year beyond mortgage.
Pre-Qualification vs. What You Can Afford
Banks may approve you for more than is wise to spend:
| Metric | Bank May Approve | Consider Targeting |
|---|---|---|
| Front-End DTI | 28-33% | 20-25% |
| Back-End DTI | 43-50% | 30-36% |
Just because you qualify doesn’t mean you should max out.
Pro Tips
-
Include ALL housing costs - taxes, insurance, PMI, and HOA in your 28%
-
Use gross income carefully - your actual take-home is much less
-
Leave room for life - emergencies, vacations, retirement savings
-
Consider future changes - kids, career shifts, rate adjustments
-
Test the payment - “practice” by saving the difference between rent and projected mortgage
Common Errors
- Using net instead of gross: The 28/36 rules use gross (pre-tax) income
- Forgetting PMI: Adds 0.5-1% of loan annually if down payment < 20%
- Ignoring closing costs: Budget 2-5% of home price for closing
- Skipping maintenance: Homes need ongoing repairs and updates