Mortgage Affordability Calculator

What Is the Mortgage Affordability Calculator?

This is the inverse of a normal mortgage calculation -- instead of starting with a home price and finding the payment, it starts with your income, existing debt, and a target debt-to-income limit, then works backward to find the maximum loan amount (and home price) that fits within that limit.

How to Use This Calculator

Enter your gross monthly income, existing monthly debt payments, your target maximum DTI (36% is a commonly cited comfortable target), your expected mortgage rate and term, and your planned down payment.

The Formula

Worked Example

Important Notes

Checking the Worked Example

In the example above, 36% of $8,000 is $2,880, and subtracting $500 of existing debt leaves $2,380 for the housing payment. At 6.5% over 30 years, each $1,000 borrowed costs about $6.32 a month, so $2,380 supports a loan of roughly $376,500. Adding the $40,000 down payment gives a home price near $416,500. That figure is a ceiling based on principal and interest only, so a realistic price will be lower once tax, insurance, and any PMI are included.

How Each Input Moves the Answer

• Income and DTI target: a higher DTI target raises the maximum payment. Moving from 36% to 43% in this example would add several hundred dollars to the allowed payment, but a payment that large may strain your budget.
• Existing debt: every dollar of monthly debt reduces your housing budget by a dollar, so paying off a loan before applying can raise your ceiling.
• Interest rate: even a small rate change matters. A one-point difference can shift the affordable loan by tens of thousands of dollars on a 30-year term.
• Term: a shorter term increases the payment per dollar borrowed, so the maximum loan amount falls.
• Down payment: it raises the home price you can target without changing the loan amount your DTI supports.

Building a More Realistic Budget

After the calculator gives a ceiling, subtract a realistic estimate for property tax and insurance from the maximum housing payment before deciding what to aim for. Then use the Mortgage Calculator to test specific prices. Also plan for costs that lenders do not count in DTI, such as maintenance, utilities, and homeowners association dues. Many buyers choose to aim well below the maximum to keep flexibility.

Common Mistakes

• Treating the maximum as a target. What a lender may approve and what fits your lifestyle can be very different.
• Using net income. This tool expects gross monthly income.
• Leaving out debts such as student loans and minimum credit card payments.
• Forgetting that closing costs and cash reserves must also come from your savings, on top of the down payment.

Limits

Lenders also consider credit score, employment history, assets, and loan program rules, so this is not a pre-approval. Talk to a mortgage lender or housing counselor for a formal assessment.

Frequently Asked Questions