Home Affordability Calculator – How Much House Can I Afford?

Home Affordability Calculator

Find out how much house you can comfortably afford.

Your Financials

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Loan Assumptions

36%

You Could Afford a Home Price of

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Estimated Monthly Payment

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The Ultimate Guide to Home Affordability

Determining how much house you can afford is the most critical first step in the home-buying journey. It’s about more than just what a lender will pre-approve you for; it’s about finding a home that fits comfortably within your budget, allowing you to build equity without sacrificing your financial well-being. This guide breaks down the key concepts of affordability, starting with the most important number in a lender’s playbook: your Debt-to-Income ratio.

What is Debt-to-Income (DTI) Ratio and Why Does It Matter?

Your Debt-to-Income (DTI) ratio is a percentage that represents how much of your gross monthly income goes toward paying your monthly debt obligations. Lenders view it as a primary indicator of your ability to manage monthly payments and repay a new loan.

DTI = (Total Monthly Debts / Gross Monthly Income) x 100
  • Front-End DTI (Housing Ratio): This just includes your potential housing costs (principal, interest, taxes, insurance). Lenders typically like to see this at or below 28%.
  • Back-End DTI (Total Debt Ratio): This includes your housing costs PLUS all other monthly debts, like car loans, student loans, and credit card payments. This is the more critical number. Most lenders look for a back-end DTI of 36% or less, though some may go as high as 43% or even 50% for borrowers with excellent credit. Our calculator uses this back-end DTI for its primary calculation.
  • Why it matters: A low DTI demonstrates that you have a healthy balance between income and expenses, making you a less risky borrower. A high DTI can limit your loan options or lead to a higher interest rate.

Beyond the Mortgage: The Hidden Costs of Owning a Home

True affordability goes beyond your monthly mortgage payment (PITI). Homeownership comes with a variety of other expenses that you must factor into your budget.

Maintenance & Repairs

A common rule of thumb is to budget 1% of your home’s value annually for maintenance. For a $350,000 home, that’s $3,500 per year, or about $290 per month, for things like a new water heater or roof repairs.

Utilities

Water, gas, electricity, and internet bills can be significantly higher in a larger home compared to an apartment. Ask for utility bill history for any home you’re seriously considering.

HOA Fees

If you’re buying a condo, townhouse, or a home in a planned community, you will likely have Homeowners’ Association (HOA) fees. These can range from under $100 to over $1,000 per month and must be factored into your DTI.

Furniture & Upgrades

Moving into a new, larger space often comes with the desire or need for new furniture, appliances, or cosmetic upgrades. It’s wise to have a separate fund for these expenses.

How to Improve Your Home Affordability

If the number from the calculator isn’t what you hoped for, don’t be discouraged. There are several actionable steps you can take to increase how much house you can afford.

  • Pay Down Existing Debt: This is the most direct way to lower your DTI ratio. Focus on paying off high-interest credit cards or loans. Reducing your monthly debt payments by just a few hundred dollars can significantly increase your borrowing power.
  • Increase Your Income: While not always easy, exploring side hustles, negotiating a raise, or having a spouse start a new job can boost the income side of the DTI equation.
  • Improve Your Credit Score: A higher credit score qualifies you for a lower interest rate. A lower rate means a smaller monthly P&I payment, which in turn means you can afford a larger loan amount while keeping the same total monthly payment.
  • Save for a Larger Down Payment: A larger down payment reduces the total loan amount you need to borrow. It also helps you avoid PMI, which frees up more of your monthly budget for the principal and interest on the home itself.

The 28/36 Rule: A Smart Guideline

The “28/36 rule” is a popular and conservative guideline used to gauge affordability. It’s a great way to ensure you don’t become “house poor.”

  • The “28” (Front-End Ratio): Your total monthly housing payment (PITI) should not exceed 28% of your gross monthly income.
  • The “36” (Back-End Ratio): Your total monthly debt payments (PITI + all other debts) should not exceed 36% of your gross monthly income.

While lenders may approve you for a higher DTI, sticking to the 28/36 rule ensures you have enough money left over each month for savings, investments, and other life expenses without feeling financially strained by your home.