Determine your realistic home buying power with our what can i afford mortgage calculator. By analyzing your income, debts, and down payment, we calculate the maximum home price that fits your budget based on lender-standard Debt-to-Income (DTI) ratios.
Affordability Calculator
What Can I Afford Mortgage Calculator Formula
This calculator uses the Back-End Debt-to-Income (DTI) formula, which is the standard used by lenders to determine your maximum borrowing capacity.
Home Price = Down Payment + Loan Amount(Max Payment)
Variables
- Monthly Income: Your annual gross income divided by 12.
- Monthly Debts: Minimum monthly payments on credit cards, loans, etc.
- DTI (Debt-to-Income Ratio): The percentage of your gross income that goes toward debt. Lenders typically prefer this to be under 36% (Conservative) to 43% (Maximum).
Related Calculators
- Debt-to-Income Ratio Calculator
- Affordability Calculator (Salary Based)
- Closing Cost Calculator for Buyer
- Down Payment Savings Goal Calculator
What is “What Can I Afford”?
The question “what can I afford” in real estate terms refers to your Purchasing Power. It is not just about how much cash you have for a down payment; it is primarily about how much monthly payment a bank believes you can sustain.
A what can i afford mortgage calculator works backward. Instead of asking “What is the payment for a $500k house?”, it asks “If I can afford $2,000/month, what house can I buy?” It takes your income, subtracts your existing obligations (like car loans), and applies the remaining budget to a mortgage at current interest rates.
How to Calculate Home Affordability
- Calculate Monthly Gross Income: Divide your pre-tax annual salary by 12.
- Determine Max Allowable Debt: Multiply your monthly income by your target DTI (e.g., 0.36). This is the total amount of debt you can carry.
- Subtract Existing Debts: Subtract your car payments, student loans, and credit card minimums from the Max Allowable Debt. The result is your Maximum Mortgage Payment.
- Convert to Loan Amount: Use a mortgage formula to convert that monthly payment into a total loan principal based on current interest rates.
- Add Down Payment: Add your cash down payment to the loan amount to find your Total Home Price.
Frequently Asked Questions (FAQ)
This specific calculation estimates your Purchasing Power based on Principal and Interest (P&I) capacity. In reality, property taxes and insurance will reduce your buying power slightly. We recommend leaving a buffer in your DTI ratio.
The 28/36 rule is the gold standard. No more than 28% of your income should go to housing, and no more than 36% should go to total debt (housing + other debts).
A larger down payment increases your affordability in two ways: it adds directly to the purchase price and it lowers the loan amount needed, reducing monthly interest costs.
Yes! If you have zero monthly debts, your entire “debt allowance” (e.g., 36% of income) can be applied toward your mortgage, significantly increasing your purchasing power.