House Affordability Calculator
🌙Calculate how much house you can afford based on your income, expenses, and financial situation.
Affordability Breakdown
Payment Breakdown
| Component | Monthly Amount | Percentage |
|---|---|---|
| Principal & Interest | $2,200 | 77% |
| Property Taxes | $250 | 9% |
| Home Insurance | $100 | 4% |
| PMI | $100 | 4% |
| HOA Fees | $0 | 0% |
| Total Payment | $2,850 | 100% |
Recommendations
Based on your financial profile, you're in a good position to buy a home. Consider saving for a larger down payment to avoid PMI and reduce your monthly payments.
How to Calculate How Much House You Can Afford
Determining how much house you can afford is one of the most critical steps in the home-buying process. Using a house affordability calculator helps you understand your budget constraints and prevents you from overextending financially. Our advanced house affordability calculator considers multiple factors to give you an accurate estimate of what you can comfortably afford.
Key Factors in Home Affordability
Several important factors influence how much house you can afford:
- Annual Income: Your gross annual income is the starting point for determining affordability. Lenders typically use a debt-to-income ratio (DTI) to determine how much they're willing to lend.
- Monthly Debts: Existing debt obligations like car loans, credit card payments, and student loans reduce the amount you can allocate toward a mortgage payment.
- Down Payment: The amount of money you can put down upfront significantly impacts your monthly payments and whether you'll need to pay for private mortgage insurance (PMI).
- Interest Rate: Current mortgage rates affect your monthly payment amount. Even a small rate change can impact affordability by tens of thousands of dollars.
- Loan Term: The length of your mortgage (typically 15 or 30 years) changes your monthly payment amount and total interest paid.
- Property Taxes and Insurance: These ongoing costs vary by location and must be factored into your monthly housing expenses.
Understanding Debt-to-Income Ratio
Lenders use two types of debt-to-income ratios when evaluating mortgage applications:
- Front-end ratio: Also called the housing ratio, this includes all housing-related expenses (mortgage principal, interest, taxes, insurance, and HOA fees) divided by your gross monthly income. Most lenders prefer this ratio to be 28% or less.
- Back-end ratio: This includes all monthly debt obligations (housing expenses plus other debts like car loans, credit cards, and student loans) divided by your gross monthly income. Most lenders prefer this ratio to be 36% or less, though some may go up to 43% for qualified buyers.
How to Improve Your Home Affordability
If you're not satisfied with the home price range our calculator suggests, consider these strategies to improve your affordability:
- Increase your down payment: Saving more for a down payment reduces your loan amount and may eliminate PMI requirements.
- Pay down existing debt: Reducing your monthly debt obligations improves your debt-to-income ratio.
- Improve your credit score: A higher credit score typically qualifies you for better interest rates.
- Consider a longer loan term: A 30-year mortgage has lower monthly payments than a 15-year mortgage (but you'll pay more interest over time).
- Look for less expensive areas: Property taxes and insurance costs vary significantly by location.
- Increase your income: Additional income sources can improve your debt-to-income ratio.
Frequently Asked Questions
How much house can I afford with a $100,000 salary?
With a $100,000 annual salary, you can typically afford a home priced between $300,000 and $400,000, assuming you have moderate debt, a good credit score, and a 20% down payment. Use our calculator to get a personalized estimate based on your specific financial situation.
What is the 28/36 rule?
The 28/36 rule is a common guideline used by lenders: no more than 28% of your gross monthly income should go toward housing expenses, and no more than 36% should go toward total debt payments (including housing). Some lenders may be flexible with these ratios for borrowers with excellent credit or significant assets.
How does my credit score affect home affordability?
Your credit score significantly impacts the interest rate you'll qualify for. A higher credit score typically means a lower interest rate, which reduces your monthly payment and increases the home price you can afford. For example, on a $300,000 loan, the difference between a 6% and 7% interest rate is about $180 per month.
Should I use my entire pre-approval amount?
Just because a lender pre-approves you for a certain amount doesn't mean you should spend that much. Consider your lifestyle, future financial goals, and potential changes to your income. Our calculator helps you determine a comfortable payment based on your complete financial picture.
Ready to start your home search? Use our calculator regularly as you prepare to buy, and remember to factor in moving costs, furnishings, and potential maintenance expenses when setting your budget.