Home Affordability Calculator
Estimate the maximum home price you can afford based on your financial situation using standard lending guidelines.
Financial Information
How Home Affordability is Calculated
The 28/36 Rule
Lenders typically use two guidelines to determine affordability:
- 28% Front-End Ratio: Maximum 28% of gross monthly income for housing expenses
- 36% Back-End Ratio: Maximum 36% of gross monthly income for total debt payments
Key Formulas
Maximum Monthly Payment (28% Rule):
Monthly Income × 0.28
Maximum Total Debt (36% Rule):
Monthly Income × 0.36 - Existing Debts
Mortgage Calculation:
P = (PV × r) / (1 - (1 + r)^-n)
Where P=Payment, PV=Loan Amount, r=Monthly Rate, n=Payments
Example Scenarios
Example 1: First-Time Homebuyer
Income: $75,000/year ($6,250/month)
Debts: $300/month
Down Payment: $30,000
Terms: 30 years @ 6%
Calculation:
28% Rule: $6,250 × 0.28 = $1,750/mo
36% Rule: ($6,250 × 0.36) - $300 = $1,950/mo
Using lower $1,750/mo payment
Result: $325,000 home price
Frequently Asked Questions
1. What is the 28/36 rule?
The 28/36 rule is a common lending guideline where housing costs shouldn't exceed 28% of gross income, and total debt shouldn't exceed 36%.
2. Does this include property taxes and insurance?
This calculator assumes principal and interest only. Actual payments should include taxes and insurance.
