How Much House Can I Afford?

How to Calculate How Much House You Can Afford

Figuring out how much house you can afford comes down to one core question: what is the maximum monthly payment a lender will approve based on your income and debts? This home affordability calculator answers that by applying the 28/36 rule — the debt-to-income framework most US lenders use — and translating the result into a maximum home price.

The 28/36 Rule

The 28/36 rule is widely used by lenders in the United States to determine mortgage eligibility. It sets two caps on your monthly cash flow:

The calculator uses the lower of the two limits to set your maximum monthly housing payment, then converts that into a loan amount using the current interest rate and your chosen loan term. Adding your down payment gives the maximum home price.

Private Mortgage Insurance (PMI)

When the down payment is less than 20% of the home value, PMI is typically required. This calculator includes a 0.5% annual PMI rate in the affordability calculation when applicable. PMI is automatically cancelled when your loan-to-value ratio reaches 78%, which can lower your monthly payment over time.

Factors That Increase Your Affordability

Several levers can raise the maximum home price you qualify for. Increasing your down payment reduces the loan amount and may eliminate PMI. Raising your credit score can lower the interest rate, which increases purchasing power. Paying down existing debt reduces your back-end DTI, freeing up more room for the housing payment. Shortening the loan term from 30 to 15 years raises the monthly payment but cuts total interest significantly — whether that helps affordability depends on whether the higher payment still fits within the 28% front-end limit.

Home Affordability Example

Consider a household earning $120,000 per year ($10,000 per month gross) with $500 in monthly debt payments, a $40,000 down payment, and a 7% interest rate on a 30-year fixed loan. The 28% front-end limit allows a maximum housing payment of $2,800. The 36% back-end limit allows $3,600 total debt, minus $500 existing debt = $3,100 for housing. The binding constraint is the front-end ratio at $2,800. After accounting for estimated property taxes and insurance, the calculator translates that payment into a maximum loan amount of approximately $420,000, plus the $40,000 down payment, for a maximum home price around $460,000.

Now try the same scenario with a $80,000 down payment instead of $40,000. The maximum loan amount stays the same (it is driven by income, not savings), but the maximum home price jumps to $500,000 because you are putting more cash in. If you want to see the exact monthly payment breakdown for a specific home price, plug the numbers into the mortgage calculator. For a side-by-side cost comparison with renting, try the rent vs buy calculator. Looking for the full lender-style breakdown with PITI and PMI broken out? The mortgage affordability calculator covers the same 28/36 math with a detailed payment split. Before you shop, read our mortgage pre-approval guide to get a realistic budget from an actual lender. Want a fast, no-obligation estimate first? Get prequalified for a mortgage in a few minutes before you talk to a loan officer.