How home affordability is calculated
The classic underwriting framework for home affordability is the 28/36 rule. Housing costs — including principal, interest, property taxes, insurance, and HOA fees — should not exceed 28% of your gross monthly income (the "front-end ratio"). Total debt payments — housing plus all other monthly debts (auto loans, student loans, credit cards, personal loans) — should not exceed 36% of gross monthly income (the "back-end ratio").
This calculator works backwards from those ratios. Enter your gross monthly income, monthly debts, down payment, and the mortgage rate you expect to qualify for, and the calculator returns the maximum home price that fits within the 28/36 framework.
The three numbers, explained
The 28/36 rule produces a conservative number. Lenders today routinely approve borrowers at debt-to-income ratios up to 43% (and FHA loans up to 50% in some cases). This means you can typically borrow more than the 28/36 rule suggests — but borrowing the lender's maximum is rarely the right financial decision.
The right number for you sits somewhere between the conservative 28/36 figure and the lender's maximum, depending on your specific situation. Borrowers with stable dual income, strong emergency reserves, and on-track retirement savings can lean closer to the lender's maximum. Borrowers with variable income, single-income households, young children, or thin emergency reserves should stay closer to the 28/36 number.
What this calculator includes
The calculator includes principal, interest, property taxes (estimated at the national average), and insurance (estimated at the national average) — the "PITI" components of a typical mortgage payment. It does not include:
- HOA fees — Vary from $0 to $1,500+/month depending on property type and location.
- Maintenance and repairs — Plan for 1–2% of home value annually as a separate budget item.
- Closing costs — 2–3% of the loan amount, paid at closing on top of your down payment.
- Mortgage insurance — Required if down payment is less than 20%; typically 0.5–1% of the loan amount annually.
- Furniture, improvements, and moving costs — First-year owners typically spend 1–3% of home value on these.
Use the calculator's output as a ceiling, not a target. Many financial planners recommend buying 10–20% below your maximum to preserve margin for the costs the calculator doesn't model.
Worked example: $120,000 income
Suppose you and your partner together earn $120,000/year ($10,000/month gross). You have $500/month in other debt payments. You plan to put 20% down at current 6.5% mortgage rates, with property taxes at 1.1% and insurance at $1,500/year:
- 28% of $10,000 = $2,800/month max housing payment
- Working backwards from $2,800 PITI at 6.5% with 1.1% taxes and standard insurance, max home price ≈ $415,000
- Maximum loan amount at 80% LTV ≈ $332,000
- Required down payment ≈ $83,000
This is the conservative number. The lender, applying a 43% DTI maximum, might approve a home up to about $590,000 for the same household — but at that level, your housing costs would consume 38% of gross income, leaving little room for retirement saving, emergency reserves, and the unexpected costs of homeownership.
Variables that change the right answer
- Job stability. Tenured employees in stable industries can lean toward higher numbers. Commission, bonus, and self-employment income should be averaged conservatively.
- Other goals. If you're behind on retirement savings, every dollar spent on housing is a dollar not compounding for decades.
- Children. Childcare alone can cost $1,500–$3,000/month per child in many markets.
- Emergency reserves. Less than 6 months of liquid savings means you should not stretch on housing.
- Time horizon. Plan to stay 10+ years? Equity buildup and transaction costs work in your favor. Less than 5 years? Renting often wins on math.
Frequently asked questions
How much house can I afford on $100,000 a year?
Using the 28% rule and current 6.5% mortgage rates, roughly $345,000 home price assuming 20% down. Using the lender's typical 43% DTI maximum, up to $490,000. The right number depends on your other debts, savings goals, and risk tolerance.
What is the 28/36 rule?
The traditional underwriting guideline: housing costs (principal, interest, taxes, insurance, HOA) should not exceed 28% of gross monthly income, and total debt payments (housing plus all other debts) should not exceed 36% of gross monthly income. It is conservative compared to modern lender maximums of 43–50% DTI.
Should I borrow the lender's maximum?
Generally no. Lenders are willing to approve loans at higher DTI ratios than most financial planners would recommend. Borrowing the maximum the lender will offer leaves no margin for emergencies, retirement saving, or income disruption.
How much should I budget for home maintenance?
Plan for 1–2% of the home's value per year for maintenance and unexpected repairs. On a $400,000 home, that's $4,000–$8,000 annually. Older homes and homes in extreme weather climates trend toward the higher end.
Does this calculator include property taxes and insurance?
Yes. The calculator includes estimates for both, based on national averages. Your actual property tax and insurance costs vary significantly by location — confirm with a real estate agent or insurance broker for your specific area.
Should I include my partner's income?
Yes, if you'll both be on the mortgage. Lenders qualify based on combined household income. If only one person will be on the mortgage, only that person's income counts toward the calculation, though some lenders may consider the partner's income as a compensating factor.
What credit score do I need to qualify for the rates I'm calculating?
Best mortgage rates require 740+ FICO. Borrowers with scores in the 660-720 range typically pay 25-75 basis points more, and those below 660 pay 100+ basis points more. The calculator uses a standard rate; your actual rate depends on credit, down payment, and lender.
Related guides and calculators
- Best HELOC lenders
- How much mortgage can I afford in 2026?
- First-time home buyer loan guide
- Mortgage rate shopping in 5 days
- Loan calculator — for non-mortgage loans
- Refinance calculator
Disclaimer. This calculator is for educational purposes. Property tax and insurance estimates are based on national averages and may differ significantly from your actual costs. The calculator does not include closing costs, mortgage insurance, HOA fees, or homeowner maintenance budgets — all of which are real costs of homeownership. Use the calculator's output as a starting point, not a final answer. Confirm specific affordability with a mortgage lender or qualified financial planner.