Affordability Calculator

Find out how much house you can afford based on your income

How This Calculator Works

The 28/36 Rule

This calculator uses the standard 28/36 rule, which is widely used by lenders in the United States to determine mortgage eligibility:

Front-End Ratio (28%)

Total monthly housing payment (PITI) should not exceed 28% of gross monthly income.

PITI ≤ 0.28 × Gross Monthly Income

Back-End Ratio (36%)

Total monthly debt payments should not exceed 36% of gross monthly income.

Total Debt ≤ 0.36 × Gross Monthly Income

PITI Calculation

PITI stands for Principal, Interest, Taxes, and Insurance — the four components of a typical monthly mortgage payment:

  • Principal — The amount borrowed to purchase the home
  • Interest — The cost of borrowing money from the lender
  • Taxes — Annual property taxes divided by 12
  • Insurance — Homeowners insurance premium divided by 12

Loan Amount Calculation

The maximum loan amount is calculated using the present value of an ordinary annuity formula, which determines how much money can be borrowed given a fixed monthly payment, interest rate, and loan term.

PV = PMT × [(1 - (1+r)^-n) / r]
  • PV = Present value (maximum loan amount)
  • PMT = Maximum monthly payment from 28/36 rule
  • r = Monthly interest rate
  • n = Total number of payments

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.

Official Standards & Authoritative Sources

CFPB

Consumer Financial Protection Bureau

consumerfinance.gov

HUD

U.S. Department of Housing and Urban Development

hud.gov

Fannie Mae

Federal National Mortgage Association

fanniemae.com

Freddie Mac

Federal Home Loan Mortgage Corporation

freddiemac.com

FNMA Guidelines

Conforming Loan Requirements

fanniemae.com/underwriting

HMDA

Home Mortgage Disclosure Act

cfpb.gov/hmda

Frequently Asked Questions

What is the 28/36 rule?
The 28/36 rule is a standard guideline used by lenders to assess mortgage eligibility. It states that your total monthly housing payment should not exceed 28% of your gross monthly income, and your total monthly debt payments should not exceed 36% of your gross monthly income.
What counts as monthly debt?
Monthly debt includes all recurring obligations such as credit card payments, car loans, student loans, personal loans, child support, and alimony. It does not include utilities, groceries, or other monthly living expenses.
Why do lenders use these ratios?
Lenders use debt-to-income ratios to assess the risk of lending money. These ratios help ensure borrowers have enough income to comfortably afford their monthly payments without becoming overextended financially.
Can I get approved with higher ratios?
While the 28/36 rule is the standard guideline, some lenders may approve loans with higher debt-to-income ratios, especially if the borrower has strong credit, a large down payment, or other compensating factors.
How does my credit score affect affordability?
Your credit score affects the interest rate you qualify for. Higher credit scores typically result in lower interest rates, which can increase your purchasing power by reducing your monthly payment for the same loan amount.
Are there other factors lenders consider?
Yes, lenders also consider credit history, employment history, savings reserves, loan-to-value ratio, and the type of property being purchased when determining mortgage eligibility.

Disclaimer:

All calculations are approximate for planning purposes only. This tool does not provide official financial, legal, or tax advice. All financial decisions should be verified with a qualified mortgage lender or financial advisor.

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