Free House Affordability Calculator

How lenders decide what you can afford

Mortgage affordability isn't calculated from your income directly. Lenders work from two debt-to-income ratios, take whichever is more restrictive, and back into a maximum housing payment from there. This calculator follows the same path, then solves for the home price that payment supports.

Front-end vs. back-end ratios

The front-end ratio compares your housing payment alone to gross income, commonly capped near 28%. The back-end ratio compares your housing payment plus all other debt payments — car loans, student loans, credit card minimums — to gross income, commonly capped near 36%, though many loan programs allow higher.

Whichever produces the smaller housing payment is the one that binds. In the example the front-end limit binds at $2,100, meaning other debts aren't the constraint. Pay down a car loan in that scenario and your maximum price barely moves. Reverse it — high existing debt — and the back-end ratio takes over, at which point reducing debt raises your buying power directly.

Knowing which one binds tells you what actually helps: more income and a bigger down payment when it's front-end, less debt when it's back-end.

Why the down payment percentage falls as the price rises

A fixed $40,000 down payment is 20% of a $200,000 house but only 13.6% of the $294,333 the example supports. Because that lands under 20%, PMI enters the calculation — about $106 a month here — which consumes part of the payment budget and slightly lowers the price you can reach.

This creates a genuine trade-off. Buying at your maximum means a smaller percentage down and PMI; buying below it may let you cross the 20% threshold and drop PMI entirely. The calculator handles this automatically, solving the circular relationship between price, down payment percentage, and PMI.

Why a lender may approve more or less than this

Underwriting weighs factors this calculation can't see: credit score, employment history, cash reserves after closing, and the specific loan program. FHA, VA, and conventional loans use different limits — some allow back-end ratios well above 36% for strong borrowers.

The direction of the difference varies. A high credit score and solid reserves can push approval above this estimate; thin credit history or unstable income can push it below. Getting pre-approved replaces all of this guesswork with an actual number.

Approved isn't the same as affordable

This calculator answers what a lender will likely permit, which is a different question from what leaves your finances comfortable. The ratios use gross income — before taxes, retirement contributions, and health premiums — so a payment at 28% of gross can be a much larger share of what actually lands in your account.

Costs the ratios ignore entirely include maintenance (a common planning figure is roughly 1% of the home's value annually), utilities, which are usually higher than in a rental, and the reality that an owner absorbs every repair. Many people deliberately buy below their maximum for exactly these reasons.

Common mistakes

• Using take-home pay instead of gross. The ratios are defined on gross income; using net understates your limit.
• Omitting debts that count. Student loans in deferment and credit card minimums typically still count toward the back-end ratio.
• Guessing the property tax rate. It varies enormously by location and materially changes the answer.
• Forgetting closing costs. They're separate from the down payment and commonly run 2–5% of the price.
• Spending the entire down payment. Lenders like to see reserves left over, and so should you.

What this calculator doesn't include

It doesn't model closing costs, HOA dues beyond what you enter, mortgage insurance for government-backed loans (which follows different rules than conventional PMI), credit-score-based rate adjustments, or income that's variable, self-employed, or bonus-driven. It also assumes a fixed rate for the full term. Treat the result as a planning range and get pre-qualified for a figure specific to you.