What Is the House Affordability Calculator?
This calculator estimates the maximum home price you can comfortably afford based on your income, existing debts, down payment and prevailing mortgage terms. Lenders commonly use a debt-to-income (DTI) ratio to decide how much you can borrow, and this tool turns that rule into a concrete dollar figure for the home you can target.
How to Use It
Enter your gross monthly income (before taxes), your total recurring monthly debt payments (car loans, student loans, credit cards), the cash you plan to put down, your maximum DTI ratio, the annual mortgage interest rate and the loan term in years. The result shows your maximum monthly housing payment, the loan amount it supports and the total home price including your down payment.
The Formula Explained
First we find the largest monthly payment a lender will allow: $$\text{MaxPayment} = \text{Income} \times \text{DTI} - \text{Debts}$$. We then convert that monthly payment into a loan amount using the present-value-of-an-annuity formula, where \(r\) is the monthly interest rate (annual ÷ 12) and \(n\) is the number of monthly payments (years × 12): $$\text{Loan} = \text{MaxPayment} \times \frac{1-(1+r)^{-n}}{r}$$. Finally, adding your down payment gives the home price you can afford.
Worked Example
Suppose you earn $6,000/month, pay $500/month in debts, plan $40,000 down, use a 36% DTI, a 6.5% rate and a 30-year term. \(\text{MaxPayment} = 6{,}000 \times 0.36 - 500 = \$1{,}660\). With \(r = 0.0054167\) and \(n = 360\), the loan amount is about $262,650. Adding the $40,000 down payment yields an affordable home price of roughly $302,650.
FAQ
What DTI should I use? Conventional loans often cap total DTI around 36–43%. A lower ratio leaves more breathing room in your budget.
Does this include taxes and insurance? The max payment represents your total housing budget; property taxes, insurance and HOA fees come out of it, so your actual mortgage principal and interest budget may be lower.
Why does a higher interest rate reduce my home price? A higher rate means more of each payment goes to interest, so the same payment supports a smaller loan.
