Lenders decide how much you can borrow mainly from your debt-to-income ratio (DTI). The classic guideline is 28/36: housing costs up to 28% of gross monthly income, and all debts including housing up to 36%. This calculator works backwards from those limits to the highest home price that fits.
How this calculator works
Your gross monthly income is multiplied by each ratio. The housing limit is the smaller of the 28% figure and the 36% figure minus your other monthly debts.
That monthly budget has to cover principal, interest, property tax and insurance. The calculator solves for the home price whose total payment exactly equals the budget, after subtracting your down payment.
The formula
Price = (H + D × k) / (k + t)- H
- max monthly housing payment
- D
- down payment
- k
- monthly P&I per $1 borrowed
- t
- monthly tax + insurance per $1 of price
Worked example
A household earning $110,000 has $9,167 of gross monthly income. 28% is $2,567; 36% minus $500 of debts is $2,800. The lower figure, $2,567, is the housing budget.
At 6.5% over 30 years with 1.5% a year for tax and insurance and $60,000 down, that budget supports a home price of roughly $389,000.
Tips
- Pay down a car loan or card before applying — each $100 of monthly debt removed can raise your budget when the 36% limit binds.
- Affordable to a lender is not the same as comfortable for you; leave room for maintenance (about 1% of the home's value a year).
- Under 20% down usually adds PMI, which reduces the price you can afford.
Frequently asked questions
What is the 28/36 rule?
A guideline that housing costs stay under 28% of gross monthly income and total debt payments under 36%. Many loan programs allow higher ratios, but 28/36 is a conservative benchmark.
Does this include PMI?
No. If your down payment is below 20% on a conventional loan, budget for private mortgage insurance, which often costs 0.3%–1.5% of the loan per year.
Should I use gross or take-home income?
Lenders use gross (pre-tax) income, so this calculator does too. For your own budget, check the payment against take-home pay as well.
How does the interest rate change affordability?
Higher rates raise the payment per dollar borrowed. Roughly, each 1 percentage point increase reduces the affordable price by about 10%.