Before you start shopping for homes, it's essential to know what you can truly afford. Our Home Affordability Calculator uses your income, debts, expenses, and the 28/36 debt-to-income rule to calculate a realistic maximum purchase price and monthly housing payment.
Our home affordability calculator estimates the maximum purchase price you can afford using your income, debts, recurring expenses, down payment, property tax and insurance rates, and optional PMI. It applies the industry-standard 28/36 rule for debt-to-income (DTI) ratios.
We use the standard mortgage amortization formula to solve for the maximum loan amount:
Loan Amount = Affordable P&I Payment ÷ PMT Factor
Where PMT Factor = [r(1+r)n] / [(1+r)n − 1]; r = monthly rate, n = number of payments. Property taxes, insurance, and PMI are added to ensure total payment stays within DTI limits.
Maximum home price = Maximum loan amount + Down payment.
A larger down payment reduces PMI, lowers monthly payments, and increases your maximum price. Shopping for lower insurance and tax rates can also raise your affordable home price.
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