How Much Home Can I Afford?
How much home can I afford?
Enter your gross annual income, monthly debts, and down payment into the calculator above. It applies the 28/36 DTI rule that lenders use to determine your maximum affordable home price. The result shows both a conservative estimate and the maximum you could qualify for with compensating factors.
The 28/36 Rule
Most lenders use the 28/36 rule: your housing costs should not exceed 28% of your gross monthly income (front-end ratio), and your total debts should not exceed 36-43% (back-end ratio). FHA allows up to 31/43, and some programs go higher with compensating factors.
Home Affordability FAQ
A common guideline is that your total housing costs should not exceed 28% of your gross monthly income. For example, if you earn $80,000/year ($6,667/month), your maximum housing payment would be about $1,867/month. However, your total debts (housing + car payments, student loans, etc.) should stay below 36-43% of gross income.
The 28/36 rule means your housing payment should be no more than 28% of your gross monthly income (front-end ratio) and your total monthly debts should not exceed 36% (back-end ratio). FHA loans allow up to 31/43, and some lenders go higher with compensating factors like excellent credit or large reserves.
Yes. A larger down payment reduces your loan amount, which lowers your monthly payment and may eliminate PMI. This means you might qualify for a more expensive home. For example, putting 20% down instead of 5% on a $400,000 home saves roughly $300-400/month in PMI and principal costs.
Lenders count all minimum monthly payments on your credit report: car loans, student loans, credit card minimums, personal loans, child support, and alimony. They do not typically count utilities, phone bills, or insurance premiums (other than homeowners insurance).