What this calculator does
The Home Affordability Calculator works backward from the monthly payment you can comfortably afford to the maximum home price you can buy. Instead of starting with a home price and computing the payment, you tell it the total monthly housing payment you can handle (principal, interest, taxes and insurance), your down payment, the loan term and interest rate, and it solves for the loan amount and the price. The math is universal fixed-rate amortizing mortgage math; the currency symbol is cosmetic and the defaults use US dollars.
How to use it
Enter the total monthly payment you can afford, your planned down payment, the mortgage term (years or months), the annual interest rate, and your estimated annual property taxes and homeowner's insurance. The calculator strips the taxes and insurance out of your payment to find what is left for principal and interest, then inverts the mortgage formula to find the largest loan that monthly amount can support. Adding the down payment gives the home price.
The formula explained
First we split the payment: P&I = monthly payment - monthly tax - monthly insurance, where monthly tax = annual taxes / 12 and monthly insurance = annual insurance / 12. Then we invert the present-value-of-an-annuity formula. With monthly rate i = annual rate / 100 / 12 and number of payments n, the maximum loan is $$L = PI \times \frac{1 - (1+i)^{-n}}{i}$$ If the interest rate is zero, this simplifies to \(L = PI \times n\). Finally, $$\text{Home Price} = L + \text{Down Payment}$$
Worked example
Suppose you can afford $950/month, have $20,000 down, want a 30-year term at 4.125%, with $3,200 annual taxes and $520 annual insurance. Monthly tax = $266.67 and insurance = $43.33, so P&I = $640.00. With \(n = 360\) and \(i = 0.0034375\), the loan works out to about $132,054. Add the $20,000 down payment and you can afford a home of roughly $152,054.
FAQ
Why subtract taxes and insurance first? Lenders include taxes and insurance in your monthly housing cost (escrow). Only the leftover P&I actually pays down a loan, so it must be isolated before solving for the loan amount.
What if taxes and insurance exceed my budget? Then there is nothing left for principal and interest, so no mortgage is possible and the affordable home equals only your down payment.
Does this guarantee loan approval? No. It estimates affordability from payment math only; actual approval also depends on income, debt-to-income ratio, credit and lender rules.
