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Mortgage Affordability Calculator
Discover how much home you can afford based on your income, debts, down payment, interest rate, and loan term. Use this tool to plan your budget and set realistic home buying goals confidently.
Affordability Calculator
Input your financial data to estimate the maximum home price you can afford.
Understanding Mortgage Affordability: A Complete Guide
The mortgage affordability is one of the most significant financial decisions most Americans will make in their lifetime. With the median home price in the United States exceeding $400,000 and mortgage terms spanning 15 to 30 years, understanding every aspect of your mortgage is critical to long-term financial health.
This Mortgage Affordability Calculator Calculator provides detailed analysis of your mortgage scenario, helping you understand monthly payments, total interest costs, and the true cost of homeownership. Whether you are a first-time homebuyer exploring affordability or a current homeowner considering refinancing, this tool gives you the data you need to make confident decisions.
Mortgage rates are influenced by a complex interplay of factors including Federal Reserve policy, inflation expectations, the bond market, your credit score, down payment amount, and loan type. Even a small difference in your mortgage rate — as little as 0.25% — can translate to tens of thousands of dollars over the life of a 30-year loan.
Understanding how principal and interest payments are allocated over time, how prepayments can accelerate your payoff timeline, and when refinancing makes financial sense are all essential aspects of mortgage literacy that this calculator helps illuminate.
How to Use This Mortgage Affordability Calculator
- Enter your Gross Monthly Income ($) — This value represents your gross monthly income
- Enter your Monthly Debt Payments ($) — This value represents your monthly debt payments
- Enter your Available Down Payment ($) — This value represents your available down payment
- Enter your Interest Rate (%) — This value represents your interest rate
- Enter your Loan Term (years) — This value represents your loan term (years
- Enter your Property Tax Rate (%) annual — This value represents your property tax rate (%) annual
- Enter your Home Insurance Rate (%) annual — This value represents your home insurance rate (%) annual
- Click Calculate — Review your results in the output section below the form. The calculator instantly computes all values based on your inputs.
- Adjust and Compare — Modify any input to see how changes affect the result. Try different scenarios to find the optimal approach for your situation.
All calculations are performed instantly in your browser. Your data is never sent to any server or stored anywhere — your financial information remains completely private.
Formula and Methodology: Mortgage Affordability Formula (28/36 Rule)
Max Housing Payment = Gross Monthly Income × 0.28
Max Total Debt = Gross Monthly Income × 0.36
Max Mortgage = Max Housing Payment × [(1-(1+r)^(-n))/r]
Where:
- Gross Monthly Income — Your total monthly income before taxes and deductions
- 28% Rule — Maximum housing costs (PITI: principal, interest, taxes, insurance) as % of income
- 36% Rule — Maximum total debt payments (housing + all other debts) as % of income
- r — Monthly mortgage interest rate
- n — Loan term in months (typically 360 for 30-year)
Worked Example
Household income: $8,000/month. 28% of $8,000 = $2,240 max housing payment. Estimated taxes/insurance: $450/month. Available for P&I: $1,790. At 7% for 30 years: Max mortgage = $1,790 × [(1-1.00583^(-360))/0.00583] = $269,000. With 20% down: Max home price = $336,000.
Limitations and Assumptions
The 28/36 rule is a guideline, not a strict requirement. FHA loans allow up to 43% DTI, and some conventional lenders go to 50%. However, spending close to these limits leaves little room for other financial goals. Many financial advisors recommend keeping housing costs at 25% or less of take-home pay for a comfortable financial life.
Key Concepts and Definitions
Understanding the following key concepts will help you interpret your results and make better financial decisions:
- Principal — The initial amount of money involved in the calculation, whether it is a starting balance, loan amount, or investment.
- Interest Rate — The percentage charged or earned on the principal amount, typically expressed as an annual rate (APR). This rate determines how quickly your money grows or how much borrowing costs.
- Compounding — The process of earning interest on previously earned interest. More frequent compounding (daily vs. monthly vs. annually) results in higher effective returns or costs.
- Time Horizon — The length of time over which the calculation applies. Longer time horizons amplify the effects of compounding and small differences in rates.
- Present Value vs. Future Value — Present value is what money is worth today; future value is what it will be worth at a specific point in the future, accounting for growth or inflation.
These concepts form the foundation of virtually all financial calculations. Understanding how they interact helps you evaluate any financial product or decision with confidence.
Real-World Example: Putting the Mortgage Affordability to Work
Let's walk through a practical home-buying scenario.
Scenario: The Martinez family is looking to buy a $350,000 home. They have $70,000 saved for a down payment (20%) and have been pre-approved at 6.75% for a 30-year fixed mortgage.
- Loan amount: $280,000
- Monthly P&I payment: $1,816
- Monthly property tax (est.): $292
- Monthly insurance: $125
- Total monthly housing cost: $2,233
- Total interest over 30 years: $373,760
By putting 20% down, the Martinez family avoids PMI (private mortgage insurance), saving approximately $117 per month. Over the first five years, they will pay approximately $88,000 in interest and only $21,000 in principal — a common surprise for new homeowners.
If they make one extra monthly payment per year ($1,816), they would pay off the mortgage in approximately 25 years and save over $62,000 in total interest. This calculator helps visualize these powerful long-term impacts.
Scenario Comparison: Home Affordability by Income Level
Maximum affordable home price at different income levels using the 28% rule, 7% rate, 30-year term, 20% down.
| Household Income | Max Monthly PITI | Max Mortgage | Max Home Price (20% down) |
|---|---|---|---|
| $60,000 | $1,400 | $172,000 | $215,000 |
| $80,000 | $1,867 | $238,000 | $297,500 |
| $100,000 | $2,333 | $304,000 | $380,000 |
| $125,000 | $2,917 | $387,000 | $484,000 |
| $150,000 | $3,500 | $470,000 | $587,500 |
