Reviewed by CalcFi Editorial · Verified against HUD + Freddie Mac PMMS
Reviewed by CalcFi Editorial · Verified against HUD + Freddie Mac PMMS
Find out how much house you can afford based on your income, debts, and down payment.
Auto-updated · Verified daily against IRS, Fed & Treasury sources
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Household
Model your numbers solo or as a couple. Saved as one household decision either way.
Use gross — lenders qualify on pre-tax income, not take-home
Car, student loans, credit cards
Avg US ~1.07%
~0.4% of home value
Marcus (34, software engineer, $145k) and Priya (32, UX designer, $98k) are DINKs in Austin. Combined gross: $243,000. They have $120,000 saved, $0 student debt, one car payment of $480/mo.
Takeaway: At 36% back-end DTI they can carry ~$7,290 total monthly debt — $6,810 for PITI after the car payment. Texas has no state income tax, boosting net take-home vs California peers. Travis County effective property tax ~2.0% means a $820k home adds ~$1,367/mo in tax alone — keep that front-of-mind when rate-shopping.
This calc uses front-end DTI (housing / gross income). Conventional lenders cap front-end at 28% and back-end (all debt) at 36–45%. If you carry $800/month in car and student loan payments, a 43% back-end cap on $8,000 gross income limits total debt service to $3,440 — meaning your mortgage ceiling is $2,640, not the $2,240 front-end alone implies.
Debt-to-Income CalculatorLenders typically average the last two years of Schedule C or 1099 income — not current year gross. A freelancer who earned $60k in 2024 and $90k in 2025 qualifies on $75k/yr, not $90k. A first-year spike does not help.
The calc uses the rate you input. Qualifying for a $450k home at 6.5% does not mean you can afford it at 8% if your ARM adjusts. A 1.5% rate increase on a $450k loan raises monthly P&I by ~$430.
Refinance CalculatorGift funds must be documented with a gift letter and cannot be a loan. FHA allows full gift down payments; conventional Fannie/Freddie require borrower contribution of 3% minimum on loans above 80% LTV when using gifts. Mis-sourced funds cause last-minute denials.
HOA dues count as housing expense in front-end DTI. At $500/month HOA, your maximum P&I payment drops by $500 for any given front-end ratio — effectively reducing purchasing power by ~$70k at 7%.
Based on your inputs
Lenders will likely approve up to $358,406 based on income + DTI. Personal-finance experts suggest staying ~80% of that ($286,725) to keep room for life — emergencies, kids, career shifts.
Loan: $298,406
| Annual Income | $100,000 |
|---|---|
| Monthly Gross | $8,333 |
| Existing Monthly Debts | $500 |
| Down Payment | $60,000 |
| Max Monthly Payment | $2,333 |
| Max Loan Amount | $298,406 |
| Max Home Price | $358,406 |
| Debt-to-Income Ratio | 34.0% |
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The 28/36 rule is the industry standard lenders use to determine mortgage approval. It has two components:
Front-end ratio (28%): Your monthly housing payment (PITI: Principal, Interest, Taxes, Insurance) should not exceed 28% of your gross monthly income.
Back-end ratio (36%): Your total monthly debt payments (housing + car loans + student loans + credit cards + etc.) should not exceed 36% of gross monthly income.
Lenders typically use the more restrictive of the two. If one limits you to $300K home price and the other to $350K, the $300K is your actual cap.
These ratios exist because they predict default risk. Decades of mortgage data shows that borrowers spending 28-36% of income on housing have dramatically lower default rates than those exceeding these thresholds. Lenders aren't being conservative to protect you—they're protecting their own capital. The rule is mathematically proven to separate safe borrowers from risky ones.
Step 1: Annual salary ÷ 12 = Gross monthly income. For example: $80,000 ÷ 12 = $6,667/month. Step 2: Gross monthly income × 0.28 = Max PITI. Example: $6,667 × 0.28 = $1,867/month maximum. Step 3: Work backwards to find max home price using our mortgage affordability calculator to handle the reverse calculation.
Down payment is arguably the most misunderstood variable. Many people think bigger down payment = less you can borrow. Actually, bigger down payment = more you can borrow at same monthly payment. A larger down payment reduces your loan amount, reducing monthly P&I. At the same total monthly payment, you can afford a more expensive home. Example at $2,000/month max PITI (7% rate, 30 years): 5% down ($15K on $300K home) = ~$360K affordability. 10% down ($30K) = ~$375K affordability. 20% down ($60K) = ~$405K affordability. Why? Because 20% down eliminates PMI (Private Mortgage Insurance). At 5-10% down, you're paying $100-200/month in PMI, which counts toward your PITI.
Many first-time buyers only think about principal and interest (PI). But PITI includes taxes (T) and insurance (I), which vary wildly by location. Example: Same $400,000 home with $300,000 mortgage at 7%, 30 years. P&I payment = $1,996/month everywhere. New Jersey (1.6% property tax): Add $533/month + $150 insurance = $2,679 total PITI. Texas (0.6% property tax): Add $200/month + $100 insurance = $2,296 total PITI. Florida (0.8% property tax): Add $267/month + $120 insurance = $2,383 total PITI. The same home's PITI payment ranges from $2,296 to $2,679—a $383/month swing (16.7% difference!). This massively impacts affordability.
Just because a lender allows 36% DTI doesn't mean it's the right call. At 36% DTI on an $80,000 salary ($2,880/month debt), you have only $4,453/month for food, utilities, gas, childcare, insurance, and savings. That's roughly $1,573/month left after taxes and debt—extremely tight for a family. One job loss, one car breakdown, one medical emergency, and you're insolvent. Healthier approach: Aim for 25-28% DTI housing. Your lender wants you to pay on time. You want to not be financially destroyed. Different goals. Protect yourself first.
Interest rates are the hidden variable that demolishes affordability conversations. Same scenario: $2,000/month PITI budget, 30-year, 20% down on home price. At 5% interest: $424,000 home. At 6% interest: $395,000 home. At 7% interest: $370,000 home. At 8% interest: $347,000 home. A 3% interest rate jump reduces home affordability by $77,000—nearly 20%. This is why shopping for rates matters enormously. Get pre-approved by multiple lenders. A rate difference of 0.25-0.5% could save you $50-150/month and unlock $20K-$50K in additional purchasing power.
Yes, but lenders scrutinize self-employed income more heavily. You'll need 2-3 years of tax returns to prove stable income.
Yes. Both spouses' incomes count toward the 28/36 calculation. This is why dual-income households typically qualify for much higher prices.
No. Many financial advisors recommend buying 10-20% below your max to preserve flexibility and emergency cushion.
The 20% down payment rule persists because it's historically optimal for lenders. But it's not a requirement—it's a preference. In reality, conventional lenders accept 5% down, FHA accepts 3.5%, and VA accepts 0% for eligible veterans. Think of down payment as a spectrum: 0-5% maximum accessibility/highest costs, 5-10% moderate accessibility/high costs, 10-15% balanced approach, 15-20% getting closer to optimal, 20%+ lender-preferred/lowest costs.
Private Mortgage Insurance (PMI) protects the lender if you default—not you. It's basically a penalty for not having enough capital upfront. PMI costs: Typically 0.5-1.5% of loan amount annually. On a $270,000 loan (90% of $300K home), PMI could be $1,012-$3,038/year ($84-$253/month). Better credit = lower PMI. A 740 FICO score pays roughly 30% less PMI than a 620 FICO.
$400,000 home purchase: 20% down ($80K): Monthly P&I = $1,912, no PMI, total ~$2,112 PITI. 10% down ($40K): Monthly P&I = $2,157, PMI = $160/month, total ~$2,357 PITI. 5% down ($20K): Monthly P&I = $2,280, PMI = $200/month, total ~$2,480 PITI. Dropping from 20% to 5% down reduces upfront cash but increases monthly payment by $368/month—$4,416/year. Over 10 years, that's $44,160 in extra payments.
In certain market conditions, waiting for 20% down costs more than buying with 10% down and paying PMI. Home price today: $300,000. You need 1.5 years to save the additional $15K for 20% down. Home price in 1.5 years (3% appreciation): $346,500. By delaying, you lose the appreciation gain ($46,500) while paying rent. Buying with 10% down and paying PMI is often financially superior to waiting. The mortgage payment builds equity while appreciation works in your favor.
PMI isn't permanent. You can remove it once you reach 80% LTV. Home appreciation + automatic removal: If your home appreciates and reaches 78% LTV, lenders must remove PMI. Principal reduction: Make extra principal payments to reach 80% LTV faster. Refinancing: If rates drop, refinance to a loan with 20% down equity and eliminate PMI.
Don't mix them up. Down payment: The money you bring that goes toward purchase price (5-20% of home price). Closing costs: Fees for loan, appraisal, title, inspection, attorney, etc. (2-5% of home price). Example: $300K home purchase needs $30,000 down payment + $9,000 closing costs = $39,000 total cash required.
FHA Loans (3.5% down): Best for first-time buyers with low credit. Conventional Loans (5-10% down): Best for buyers with decent credit who want PMI removal option. VA Loans (0% down): For military/veterans. USDA Loans (0% down): For rural property buyers.
Yes. Most lenders allow down payment gifts from family members with a gift letter.
Almost never. 401k early withdrawals face 10% penalty + income taxes. A $30K withdrawal costs ~$100K in lost growth.
Save 3-6 months of living expenses in emergency fund first. Never deplete your emergency fund for a house.
At $80K salary, conservative estimate: $280K-$350K home. Using 28% rule: $1,867/month PITI. With 20% down and 7% rate: ~$325K home price.
Housing costs ≤28% of gross income. Total debt ≤36% of gross. On $100K income: max housing $2,333/month, max total debt $3,000/month.
Most lenders prefer 28% or less of gross monthly income. Financial experts often recommend keeping it at 25% of net (take-home) pay for financial flexibility.
Every $10K more in down payment adds ~$58/month purchasing power at 7%. 20% down eliminates PMI ($100-200/month extra on conventional loans).
Property tax (1-2.5% of value), insurance ($100-200/month), HOA fees, maintenance (1% of value/year), utilities increase, closing costs (2-5% at purchase).
The 28/36 rule says housing costs should not exceed 28% of gross monthly income, and total debt payments should stay below 36%. Lenders use this guideline to determine how much mortgage you can reasonably qualify for.
At $100K salary with the 28% rule, your maximum monthly housing cost is $2,333. At 7% interest with 20% down, this supports roughly a $350,000-$400,000 home depending on local taxes, insurance, and your existing debts.
A larger down payment reduces the loan amount needed, lowering monthly payments and potentially eliminating PMI. Putting 20% down versus 5% on a $400,000 home saves roughly $200 per month and avoids $150-$250 in monthly PMI.
DTI includes minimum payments on credit cards, auto loans, student loans, personal loans, child support, and alimony. It does not include utilities, insurance premiums, groceries, or subscriptions. Paying off debts before applying increases borrowing power.
Each 1% rate increase reduces buying power by roughly 10%. At 6% interest you can afford a $400,000 home, but at 8% the same monthly payment only supports about $330,000. Rate changes dramatically impact how much house you can buy.
Max Housing = Gross Monthly Income × 28%
Max Housing (DTI) = Gross Monthly Income × 43% − Monthly Debts
Use the lower of the two. Then reverse the mortgage formula to find the max loan amount, then add your down payment for max home price.
Every formula on this page traces to a federal agency, central bank, or peer-reviewed institution. We cite the rule-makers, not secondhand blogs.
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Result: Max home price ~$395,000 at 43% DTI — target $365k for comfort at 36% DTI
CFPB qualified-mortgage rules cap DTI at 43% (with 2024 ATR-QM amendments allowing higher with compensating factors). Subtracting $700 existing debt from the $4,838 DTI cap leaves $4,138/mo for PITI. Backing out Ohio property tax ($528/mo on $395k) and insurance ($84/mo) leaves $3,526/mo for P&I — supporting a $569k loan principal at 6.30%. The binding constraint is usually down payment savings, not DTI.
Result: Max home price ~$340,000 — but NYC/Long Island stock often requires $500k+ minimum
A 36% DTI cap gives $2,850/mo for PITI. New York's 1.72% property tax and modest insurance leave ~$2,280 for P&I — supporting $368k in loan principal. Total price with $60k down = $428k max. This is below NYC median but fine for upstate NY. Geography matters: the same income supports 2x the home in Buffalo vs Queens.
Result: Max $685,000 home — but TX property tax + insurance consume 19% of PITI vs 9% in CA
Income supports aggressive borrowing in TX, but the effective carrying cost is higher per dollar of home because TX has no state income tax offset for property tax (Proposition 2019 homestead cap exists but is modest). Net-of-tax cost is closer to California than the sticker math suggests. Model at 40% DTI for resilience in high-tax states.
DTI ratios use gross income by lender convention, but your actual cash flow depends on take-home. A 43% DTI on gross may be 60%+ on take-home after taxes, 401(k), and healthcare.
Impact: A $10k/mo gross earner with $7k take-home committing $4,300 to housing has only $2,700 left for everything else.
Property tax ranges from 0.28% (Hawaii) to 2.47% (New Jersey) per Tax Foundation. Same home price, same income — NJ buyer can afford 15–20% less house than Hawaii buyer.
Impact: On a $500k home: NJ property tax $12,350/yr vs HI $1,400/yr — $913/mo escrow difference.
The 28% front-end ratio assumes moderate COL. In high-COL metros (NYC, SF, Boston), 28% may still leave insufficient cash for transport, childcare, and groceries. Use 25% front-end in HCOL, 30% in LCOL.
Impact: A $120k earner in SF at 28% housing + 35% childcare is cash-flow negative despite "qualifying".
Closing costs run 2–5% of loan amount. If you have $60k saved and plan 15% down on a $400k home ($60k), you have $0 left for $8k–$15k in closing costs.
Impact: Buyers often scramble at the closing table or take higher rates (lender credits) to cover the gap.
State-specific rates, taxes, and cost-of-living adjustments
Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.
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