Home Affordability Calculator guide
Work backward from your income to a realistic home price. The calculator applies the 28/36 lending rule and counts property tax, homeowners insurance, HOA dues, and an estimated PMI, so the number reflects the full monthly payment a lender will look at.
How the calculator works backward from income
A mortgage calculator starts with a price and gives you a payment. This one runs the other way. It starts with the most you can spend on housing each month, then solves for the loan that fits.
Step one is the payment cap. Under the 28/36 rule, housing can take up to 28% of gross monthly income, and housing plus all other debt can take up to 36%. The calculator uses whichever limit is lower. Step two subtracts the costs that do not depend on the loan: insurance, HOA dues, and property tax on the down payment portion. Step three divides what is left by the monthly cost of each borrowed dollar (principal and interest from the standard amortization formula, plus property tax and, if needed, PMI). That gives the loan; add the down payment and you have the price.
Worked example: $100,000 salary
Gross income $100,000 ($8,333 a month), $500 of other monthly debt, $50,000 down, 6.5% on a 30-year fixed, 1.1% property tax, $1,800 a year for insurance, no HOA. The 28% cap is $2,333. The 36% cap minus debts is $3,000 − $500 = $2,500. The lower one wins: $2,333 a month for all housing costs.
Solving gives a loan of about $279,265 and a price of about $329,265. The monthly breakdown: $1,765 principal and interest, $302 property tax, $150 insurance, and $116 estimated PMI, which adds back to $2,333. The down payment is 15.2% of the price, so PMI applies.
Raise the down payment to $90,000 and PMI disappears. The price climbs to about $380,000, not just $40,000 more, because the $116 no longer spent on PMI goes toward principal and interest instead.
PMI: the assumption to check
Private mortgage insurance protects the lender, not you, on conventional loans with less than 20% down. The calculator assumes 0.5% of the loan per year, a middle-of-the-road figure. Real quotes run roughly 0.3% to 1.5% a year: lower with a 760+ credit score and 15% down, higher with a 640 score and 3% down. Enter your lender's quote if you have one.
PMI is not forever. Under the Homeowners Protection Act, you can ask to cancel it once your balance reaches 80% of the original value, and it must end automatically at 78%. FHA loans are different: they charge an upfront premium plus an annual premium that, with less than 10% down, lasts for the life of the loan unless you refinance.
What moves the number most
Interest rate: in the example, going from 6.5% to 7.5% drops the affordable price from about $329,000 to $307,000. A full point is roughly 7% of buying power.
Property tax: the same buyer at 0.3% tax (parts of Hawaii) can afford about $361,000; at 2.2% (parts of New Jersey or Illinois) about $294,000. Look up the actual rate for the county, not the state average.
Existing debt: every $100 of monthly debt payment only matters when the 36% limit is the binding one. In the example, the 28% cap binds, so an extra $100 car payment would not change the result until debts exceed $667 a month.
Approved amount vs comfortable amount
Lenders frequently approve more than 28/36. Fannie Mae's automated underwriting can go to 50% DTI and FHA higher still. Approval tells you what the bank will risk, not what fits your life. The 28/36 rule leaves room for retirement savings, childcare, car repairs, and the 1% to 2% of home value a year most owners spend on maintenance.
Also keep cash outside the down payment: closing costs typically run 2% to 5% of the price, and many lenders want two to six months of payments in reserve.
Common mistakes
Using take-home pay. Lenders use gross income, and so does this calculator. If you budget from net pay, the stricter result may be the smarter number.
Forgetting HOA dues. A $350 monthly HOA cuts the example buyer's maximum price by about $46,000 to $48,000.
Draining savings for a bigger down payment. Putting down 20% and having nothing left for emergencies is riskier than putting down 10%, paying PMI for a few years, and keeping a cushion.
How we calculate: sources
Frequently asked questions
How much house can I afford on a $100,000 salary?
With $500 of other monthly debt, $50,000 down, a 6.5% 30-year rate, 1.1% property tax, and $1,800 a year for insurance, about $329,000 under the 28/36 rule, including an estimated $116 a month of PMI. With $90,000 down (20%+), about $380,000.
What is the 28/36 rule?
A common lender guideline: spend no more than 28% of gross monthly income on housing (principal, interest, taxes, insurance, HOA, PMI) and no more than 36% on all debts combined. You can change both limits; FHA uses 31/43.
How is PMI estimated?
When your down payment is under 20% of the price on a conventional loan, the calculator adds PMI at an assumed 0.5% of the loan per year. Real PMI typically runs about 0.3-1.5% depending on credit score and down payment, and it can be removed once you reach 20% equity.
How much should I have for a down payment?
20% avoids PMI on a conventional loan, but it is not required. Conventional loans allow 3% down for qualifying buyers, FHA allows 3.5% with a 580+ credit score, and VA and USDA loans can require 0% down. Also budget 2-5% of the price for closing costs.
Why include property tax and insurance?
Lenders count them in your housing payment. Property tax alone ranges from under 0.5% of home value a year in Hawaii to over 2% in New Jersey and Illinois, which can move your maximum price by $50,000 or more on the same income.
How much does a 1% higher interest rate reduce what I can afford?
Roughly 7-10%. In the default example, moving from 6.5% to 7.5% cuts the affordable price from about $329,000 to $307,000, a drop of $22,500. Rate shopping between lenders matters as much as saving a bigger down payment.
Is the result what a lender will approve?
Not exactly. Lenders also weigh credit score, cash reserves, employment history, and loan type, and some approve up to 43-50% DTI. Treat this as a planning number; the approval amount and the comfortable amount are not the same.
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