How Much House Can I Afford?

What this calculator does

This calculator answers the question every first-time homebuyer asks: how much house can I afford? It applies the same DTI-based rules that mortgage lenders use to qualify borrowers, plus the full monthly housing cost (principal, interest, property tax, insurance, and HOA) so the answer reflects what you actually pay.

The 28/36 rule

The 28/36 rule is the most common starting point in U.S. lending:

• Front-end DTI ≤ 28% — total housing costs (principal, interest, taxes, insurance, HOA) should not exceed 28% of your gross monthly income.
• Back-end DTI ≤ 36% — total of all monthly debt payments (the new mortgage plus auto loans, student loans, credit card minimums, etc.) should not exceed 36% of gross monthly income.

The smaller of the two ratios is your binding constraint. If you have no other debts, the front-end ratio limits you. If you have meaningful existing debt, the back-end ratio kicks in first and can dramatically reduce what you can afford.

How the calculation works

1. Compute the monthly housing budget from each DTI ratio. Pick the smaller as the binding cap.
2. Subtract estimated property tax, homeowners insurance, and HOA dues from that cap to get a maximum monthly principal-and-interest payment.
3. Invert the standard amortization formula to back into the largest loan principal that produces that P&I payment.
4. Add the down payment to get the maximum home price.

Tips and common mistakes

• Use gross income, not take-home. Lenders qualify you on gross. But for personal budgeting, target 25–30% of net pay for housing — gross-based ratios assume a higher savings rate than most people actually achieve.
• Include all debt payments. Even a $200/month car loan can drop your maximum home price by $30,000 or more.
• Don't forget maintenance. Budget about 1% of the home price per year for upkeep on top of taxes and insurance.
• Get pre-approved. A pre-approval letter from a lender confirms what you can actually borrow at current rates and gives you negotiating leverage with sellers.

Frequently asked questions

What is DTI and why does it matter?

DTI (debt-to-income ratio) is the percentage of your gross monthly income that goes to debt payments. Lenders use two versions: front-end (just housing) and back-end (all debts including the new mortgage). Most conventional lenders cap front-end around 28% and back-end around 36% — though FHA and other programs sometimes allow up to 43% or even 50% with compensating factors.

What is a good DTI ratio for a mortgage?

Below 36% back-end is considered comfortable for most borrowers. From 36% to 43% you can usually still qualify but with less cushion. Above 43% you'll have trouble qualifying for a conventional loan, and the monthly burden will leave little room for savings or unexpected expenses.

Should I buy as much house as I qualify for?

Almost never. Lenders qualify you based on a snapshot — they don't know your kids' future tuition, your retirement goals, or how much you value travel. A common rule: target 25% of net pay for total housing costs, well below the 28% gross-income front-end cap. Buying less house than you qualify for is the easiest way to stay financially flexible.

How much down payment do I really need?

Conventional loans typically want 5–20% down. Below 20%, you'll pay private mortgage insurance (PMI) until you reach 20% equity. FHA loans go down to 3.5%. VA and USDA loans can be 0%. A 20%+ down payment lowers your monthly payment, avoids PMI, and gives you negotiating leverage with sellers.

Why does my back-end DTI matter more than my income?

Two people earning $100,000 can afford very different houses depending on existing debt. If one has a $700/month car loan and student loans, that $700 has to come out of the back-end budget before the mortgage. The other person, debt-free, has the entire 36% available for housing. Income alone isn't the constraint — it's income minus existing obligations.

Does this include PMI and other costs?

This calculator includes principal, interest, property tax, homeowners insurance, and HOA dues. It does not include PMI (which is required when you put less than 20% down), maintenance, utilities, or HOA special assessments. Build in a maintenance budget of about 1% of the home price per year for a realistic total cost.