Table of Contents
Home Affordability Calculator
Enter your financial details to estimate how much house you can afford:
The 28/36 Rule Explained
The 28/36 rule is the mortgage industry's standard for determining affordability:
The 28% Rule (Front-End Ratio)
Your monthly housing costs should not exceed 28% of your gross monthly income. Housing costs include:
- Mortgage principal and interest (P&I)
- Property taxes
- Homeowners insurance
- HOA fees (if applicable)
- Private mortgage insurance (PMI)
The 36% Rule (Back-End Ratio)
Your total monthly debt payments should not exceed 36% of your gross monthly income. This includes:
- All housing costs (from above)
- Credit card minimum payments
- Car loans
- Student loans
- Personal loans
- Child support/alimony
💡 Quick Example
With an annual income of $80,000:
- 28% of gross monthly ($6,667) = $1,867 max housing
- 36% of gross monthly = $2,400 max total debt
- If you have $500 in other debt payments, max housing = $1,900
Key Factors That Affect Affordability
1. Credit Score
Your credit score directly impacts your interest rate. A higher score means lower rates and more buying power:
| Credit Score | Typical Rate | Impact on $300K Loan |
|---|---|---|
| 760-850 | 6.5% | Baseline |
| 700-759 | 6.75% | +$50/month |
| 660-699 | 7.25% | +$150/month |
| 620-659 | 8.0% | +$300/month |
2. Down Payment
The more you put down, the less you need to borrow. A 20% down payment also eliminates PMI, saving you $100-300/month.
3. Debt-to-Income Ratio (DTI)
Lenders prefer DTI under 36%, but some allow up to 43% with compensating factors (high credit score, significant savings).
4. Employment Stability
Lenders typically want to see 2+ years at your current job or in the same field.
Hidden Costs of Homeownership
Don't forget these expenses when budgeting:
| Expense | Typical Cost | Notes |
|---|---|---|
| Property Taxes | 1-2% of home value/year | Varies by location |
| Homeowners Insurance | $1,200-2,500/year | Required by lenders |
| PMI | 0.3-1.5% of loan/year | Required if <20% down |
| HOA Fees | $100-500/month | If applicable |
| Maintenance | 1-3% of home value/year | Ongoing repairs |
| Utilities | $200-400/month | Often higher than renting |
Down Payment Guide
| Down Payment | Pros | Cons |
|---|---|---|
| 3-5% (FHA/Conventional) | Buy sooner, keep savings | PMI required, higher payment |
| 10% | Lower PMI, better rate | Still requires PMI |
| 20% | No PMI, best rate | Longer to save |
| 25%+ | Lowest payment, equity cushion | Opportunity cost of tied-up cash |
Expert Tips for Home Buyers
💡 Before You Buy
- Get pre-approved, not just pre-qualified: Pre-approval shows sellers you're serious
- Don't max out your budget: Leave room for unexpected expenses
- Consider future income changes: Will your income grow or shrink?
- Factor in commute costs: A cheaper home farther away may cost more overall
- Keep an emergency fund: Don't use all savings for the down payment
⚠️ Common Mistakes
- Buying at the absolute maximum you qualify for
- Ignoring property taxes and insurance in budget
- Not accounting for maintenance costs
- Draining emergency savings for down payment
- Forgetting about closing costs (2-5% of purchase price)
Bottom Line
Just because you qualify for a certain amount doesn't mean you should spend that much. Use the 28/36 rule as a maximum guideline, but consider your lifestyle, future goals, and comfort level with monthly payments. A more conservative budget often leads to greater financial peace of mind.