MORTGAGE

House Affordability Calculator

Lenders use simple income rules to decide how much house you can afford, comparing what you earn with the cost of a home and the debts you already pay. This calculator applies the classic 28/36 rule to your income and debts to find a home price and a monthly payment that fit. Enter your figures below and press Calculate to see your ceiling.

How to use this house affordability calculator

1. Enter your annual gross income. Use your pay before tax and deductions, which is on your payslip, your offer letter or your most recent tax return. If you are buying with a partner, lenders usually count both incomes together.
2. Add your other monthly debts. These are the regular payments on car loans, student loans, credit cards and any other debts you already have. Your bank statements and card statements show the amounts. Everyday bills such as utilities and groceries do not count here.
3. Enter the down payment you have saved or expect to have when you buy. Your savings account balance tells you where you stand today.
4. Add the interest rate and the loan term. A lender pre-approval letter gives you both. If you do not have one yet, use a rate from a lender quote and try 30 years first, then compare 15 years.
5. Enter the annual property tax rate for the area where you want to buy. It is often shown on the property listing, and your county tax assessor publishes local rates as well.
6. Add the yearly home insurance cost. Use a quote if you have one. If not, $2,000 to $2,500 a year is a reasonable estimate for a mid priced home.
7. Press Calculate. You will see the maximum monthly housing payment that fits the 28/36 rule, the maximum home price it points to, the loan amount, and the monthly principal and interest at that price.

A worked example

Say you earn $90,000 a year and pay $350 a month towards a car loan and card minimums. Your monthly gross income is $7,500. The 28% side of the rule allows $2,100 a month for housing. The 36% side allows $2,700 in total debts, minus your $350 of other debts, which leaves $2,350. The calculator takes the lower figure, so your maximum housing payment is $2,100 a month.

With $40,000 saved for a down payment, an interest rate of 6.5% over 30 years, property tax at 1.1% and home insurance of $2,400 a year, that $2,100 payment points to a maximum home price of $297,460.83. The loan would be $257,460.83. Of the $2,100 payment, $1,627.33 is principal and interest, about $272.67 covers property tax and $200 covers insurance.

Treat that price as a ceiling rather than a target. A payment at the limit can still leave a monthly budget feeling tight, so run the numbers again with a lower price and see how much breathing room it buys you. The Consumer Financial Protection Bureau offers free guides for home buyers and borrowers.

Related calculators

• Mortgage Calculator: work out the full monthly payment on a specific home, with property tax and home insurance included.
• Down Payment Calculator: see how much you need to put down and how long it will take you to save it.
• Rent vs Buy Calculator: compare the cost of buying with renting over the years you plan to stay.
• Budget Calculator: check a new housing payment against the rest of your monthly spending.

How this house affordability calculator works

The 28/36 rule is a standard lender guideline. It says housing costs should stay near or below 28% of your gross income, and all of your debts together, including the new housing payment, should stay near or below 36% of your gross income.

Lenders use these ratios to judge whether a new mortgage payment fits alongside the debts you already have, so the calculator takes the lower of the two budgets as your maximum housing payment. Treat that figure as a ceiling, not a target: a payment at the very limit may satisfy a lender and still leave your monthly budget uncomfortably tight.

The calculator then works backwards from that payment limit to a home price. It finds the price at which the loan payment, plus property tax and home insurance, adds up to exactly that monthly payment, after your down payment has been taken off the amount you need to borrow.

Practical tips

• Leave room in your budget for maintenance, which averages roughly 1% of the home’s value a year, plus the repairs that turn up without warning.
• A bigger down payment raises the price you can afford at the same monthly payment, because you borrow less and pay less interest over the term.
• Paying off a monthly debt before you apply can raise your budget a lot, because it lifts the 36% side of the rule and frees up income every month.
• Get a real pre-approval before you start house hunting, because lenders check your credit and your documents, which this estimate cannot do.

Frequently asked questions

What is the 28/36 rule?

The 28/36 rule is a standard lender guideline. It says housing costs should be at or below 28% of your gross income, and your total debts, including the new housing payment, should be at or below 36% of your gross income.

How much house can I afford on my salary?

Very roughly, many buyers end up at around 3 to 4 times their annual income, but the real answer depends on the interest rate, your debts, property tax and your down payment. That is why this calculator uses those figures instead of a single multiple of salary.

Which debts count towards the 36%?

Car loans, student loans, credit card minimum payments and other regular monthly debts count towards the 36%. Everyday living costs such as utilities and groceries do not, because they are not debts.

Should I buy a house at the maximum I can afford?

Usually not. Buying at the maximum leaves nothing spare for maintenance, savings or everyday life, so most buyers are happier buying below it and keeping a cushion in the budget.