House affordability calculator

How much house you can afford, run through the 28/36 rule with property tax, insurance, and PMI included — plus the gap between what a lender will approve and what leaves you room to breathe.

How the math works

The calculator starts with two limits — the pair lenders call the 28/36 rule — and takes whichever one leaves less room. The front-end ratio caps housing at 28% of gross monthly income. The back-end ratio caps all debt, the mortgage plus car loans, student loans, and credit card minimums, at 36%. Your housing budget is the smaller of the 28% figure and the 36% figure minus your existing monthly debt.

Once the calculator has a monthly housing budget, it works backward to a price. That budget covers the whole payment, not just the loan: principal and interest, property tax, homeowners insurance, PMI if the down payment is under 20%, and any HOA dues. It backs out the principal-and-interest share, converts that to a loan with the standard mortgage formula, and adds the down payment. Here i is the monthly rate — the annual rate over 12 — and n is the term in months. Property tax and PMI both scale with the price, so the math solves for price directly rather than guessing at it.

Worked example

Take a household earning the U.S. median household income of $80,610 — $6,717.50 a month. Say they carry $600 a month in other debt, a car payment and a student loan, and have $60,000 for a down payment. Mortgage rate: 6.85%, the Freddie Mac 30-year average. Property tax: 0.89%, the national average. Insurance: $3,303 a year.

The 28% front-end cap is $1,880.90. The 36% back-end cap, after subtracting the $600 of other debt, is $1,818.30. The back-end limit is lower, so it binds: the housing budget is $1,818.30 a month.

Working backward, that budget supports a home price of about $265,442 on a $205,442 loan. The payment breaks down to $1,346 in principal and interest, $197 in property tax, and $275 in insurance — $1,818 a month, the full budget.

Now the part most calculators skip. What if this household clears the $600 of debt first? The back-end cap rises to the full $2,418.30, but the 28% housing cap doesn't move — it's still $1,880.90 — so that becomes the binding limit. The affordable price rises to about $274,024. Clearing $600 of monthly debt bought roughly $8,582 more house, not the tens of thousands the payment math alone would suggest, because the 28% cap took over partway there.

When this calculator is wrong

The number above is a prudence line, not the number a lender will hand you. That gap is the first and biggest way an affordability calculator misleads.

• It reports what's sensible, not what's approvable. Fannie Mae's automated underwriting approves conventional loans up to a 50% back-end DTI with strong credit and reserves; the old Qualified Mortgage line sat at 43%. Run the same household at 50% and the approvable price jumps to about $367,983 — roughly $103,000 above the 28/36 figure. That spread is room the bank is willing to give you and the 28/36 rule is not.
• It uses gross income, not take-home. The 28% and 36% caps are measured against income before tax and withholding. A household paying the 7.65% FICA rate plus income tax sees a good deal less than $6,717.50 reach the account, so the rule's "affordable" payment can still run tight against real cash flow.
• Property tax and insurance vary more than the averages suggest. The 0.89% tax rate and $3,303 premium are national averages; effective property tax runs under 0.4% in some states and over 2% in others, and insurance has climbed fast in disaster-exposed markets. In a high-tax, high-premium county the same budget buys noticeably less house.
• It assumes today's rate holds. At 6.85% the payment on a $205,442 loan is $1,346. Drop the rate a point and the same budget stretches to a larger loan; add a point and it shrinks. The affordable price moves with the rate you actually lock.

What to do with the result

Treat the 28/36 number as your ceiling and the lender's approval as a warning, not a target. If the calculator says $265,442 and the bank offers to approve $367,983, the extra $103,000 is a bigger payment against the same paycheck. The lender is paid on the size of the loan, not on how much room you have left at the end of the month.

If existing debt is the binding constraint — the calculator flags when the 36% back-end limit is the one that bites — the move that frees the most budget is paying down the debt that sits above 8% of your income, since that's the portion actually shrinking your budget. Below that line, more debt paydown does nothing for what you can borrow, and the money does more work as a bigger down payment instead.

Common questions

What is the 28/36 rule?

A conventional underwriting guideline: no more than 28% of gross monthly income on housing, and no more than 36% on total debt including the mortgage. It's a starting point lenders and planners use, not a law, and the number it produces is meant to be conservative.

Does the calculator use gross or net income?

Gross — income before tax. That's how the 28/36 ratios are defined and how lenders measure them. It means the affordable payment is set against a bigger number than what actually lands in your account, so build in a margin for the difference.

How much house can I afford on $80,000 a year?

With no other debt, the 28% cap allows about $1,867 a month for housing. At 6.85% with average tax and insurance and $60,000 down, that supports a home price near $272,073. Other debt, a higher rate, or a smaller down payment lowers it.

Why does the calculator include PMI?

Because with less than 20% down, private mortgage insurance is part of the monthly payment, and leaving it out overstates what you can afford. PMI runs 0.46% to 1.50% of the loan a year and drops off once you reach 20% equity. The calculator adds it whenever the down payment is under 20% of the price.

Should I make a bigger down payment or pay off debt first?

If the 36% total-debt limit is holding your budget down, paying off debt above 8% of your income raises what you can borrow almost dollar for dollar. Once the 28% housing cap becomes the binding limit, extra debt paydown stops helping and a larger down payment does more. The calculator shows which limit is binding at your numbers.