How Much House Can I Afford?
Calculate your home buying budget using standard Debt-to-Income (DTI) bounds. Estimate your maximum home purchase ceiling, borrowing power, and monthly payment structure.
1. Financial Inputs
Conservative (36%): Uses standard financial wisdom, ensuring you have plenty of room for savings.
Based on your inputs, this is the maximum recommended home purchase price.
Estimated Monthly Costs
How Affordability is Calculated
An overview of lenders' Debt-to-Income (DTI) bounds and reverse-engineered calculations.
Lenders' Core Ratio Formula
Traditional lenders evaluate the percentage of gross monthly income consumed by debts.
(Gross Annual Income / 12) × DTI%
− Current Monthly Debts
Once lenders compute your maximum monthly capacity, we reverse-engineer the purchase budget by backing out estimates for the following components:
Principal & Interest
The core loan amortization payment, based on interest rates and loan term.
Property Taxes
Estimated at 1.2% of the home purchase price annually, divided monthly.
Homeowners Insurance
Estimated at 0.5% of the purchase price annually, divided monthly.
PMI (Mortgage Insurance)
Applied if down payment is under 20% (estimated at 0.5% of loan value).
Frequently Asked Questions
What debt-to-income ratio do lenders use to calculate home affordability?
Lenders evaluate front-end DTI (housing costs under 28% of gross income) and back-end DTI (housing costs plus debts like loans and credit cards). Conforming guidelines set conservative limits at 36% back-end DTI, while allowing up to 43% or 50% for aggressive profiles.
How does a down payment affect how much house I can afford?
A larger down payment directly increases your purchase price budget without increasing your mortgage loan size or monthly payment. Additionally, putting down 20% or more avoids Private Mortgage Insurance (PMI), reducing your monthly costs.