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Home Affordability Calculator

With household income, a year 90000 usd, other debt payments, a month 450 usd, down payment 40000 usd, mortgage rate 6.5 percent, home affordability comes to $304,369 — house you can afford. It is reached in 11 steps, the last of which is loan + down, and each one is printed on the page with its numbers filled in. The formula is the one published by 12 CFR 1026.43, not an approximation fitted to it.

The house price your income supports under the 28/36 rule, with property tax, insurance and HOA inside the limit rather than added on top.

By Alex Seote, Built and maintains Rule Calculator · Formula and sources checked · How we check

Household income, a year 90000, Other debt payments, a month 450, Down payment 40000, Mortgage rate 6.5

$304,369

House you can afford for the example below. Editing a field recomputes the calculator below; this figure holds the answer the page was loaded with.

It is written into the HTML rather than drawn by a script, so a search engine reading this page without running JavaScript still finds an answer.

House you can afford
$304,369
Income a month
income / 12$7,500
Housing limit, 28% of income
monthly_income * 0.28$2,100
Debt limit, 36% of income less what you owe
monthly_income * 0.36 - debts$2,250
Housing payment a lender will allow
max(0, min(front_limit, back_limit))$2,100
Left for principal, interest and tax on the borrowed part
max(0, budget - down * tax_rate / 100 / 12 - insurance / 12 - hoa)$1,913
Mortgage this supports
available / (factor + tax_rate / 100 / 12)$264,369
House price
loan + down$304,369
Principal and interest
loan * factor$1,671
Property tax a month
price * tax_rate / 100 / 12$279.01
Insurance a month
insurance / 12$150
Down payment as a share of price
price == 0 ? 0 : down / price * 10013.142 %

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Worked example

On $90,000 a year the 28% housing limit is $2,100 a month and the 36% total-debt limit leaves $2,250, so housing is the binding one. Out of that $2,100, insurance takes $150 and property tax takes $279, leaving $1,671 for principal and interest — a $264,369 mortgage, and with $40,000 down, a house at about $304,000.

How to work it out yourself

  1. 1.Enter gross household income before tax, and the monthly payments on debts a lender will see on your credit report.
  2. 2.Read both limits. If the 36% line is the smaller one, your debts are what is holding the number down and paying one off raises it more than a raise would.
  3. 3.Check the property tax rate for the actual county, not the state average. Between a 0.5% county and a 2% county the same income buys a different house.

The formula

  1. Income a monthincome / 12
  2. Housing limit, 28% of incomemonthly_income * 0.28
  3. Debt limit, 36% of income less what you owemonthly_income * 0.36 - debts
  4. Housing payment a lender will allowmax(0, min(front_limit, back_limit))
  5. Left for principal, interest and tax on the borrowed partmax(0, budget - down * tax_rate / 100 / 12 - insurance / 12 - hoa)
  6. Mortgage this supportsavailable / (factor + tax_rate / 100 / 12)
  7. House priceloan + down
  8. Principal and interestloan * factor
  9. Property tax a monthprice * tax_rate / 100 / 12
  10. Insurance a monthinsurance / 12
  11. Down payment as a share of priceprice == 0 ? 0 : down / price * 100

Source: 12 CFR 1026.43 — Minimum standards for transactions secured by a dwelling (ability to repay), HUD Handbook 4000.1 — FHA Single Family Housing Policy Handbook

Questions people actually ask

What is the 28/36 rule?
Two ceilings that mortgage underwriting has used for decades: housing costs no more than 28% of gross monthly income, and all debt payments together no more than 36%. Neither is a law — the legal standard is a lender’s reasonable determination that you can repay — and programmes differ, with FHA commonly allowing 31/43 and some conventional loans going past 45% with compensating factors.
Does the 28% include property tax and insurance?
Yes, and this is where most affordability calculators mislead. The limit is on the whole housing payment: principal, interest, taxes, insurance and any HOA dues — PITI. On the example above, taxes and insurance eat $429 of the $2,100, which is nearly $68,000 of purchase price. A calculator that caps only principal and interest overstates what you can buy by roughly that much.
Why does paying off a car loan raise the price so much?
Because it lifts the 36% ceiling directly. Every $100 a month of other debt takes $100 off the housing budget, and at a 6.5% rate over 30 years each $100 of monthly payment is worth about $15,800 of mortgage. Clearing a $450 car payment can therefore be worth $70,000 of house — far more than most people expect, and more than a raise of the same size.
What about PMI?
Not included here. Below 20% down, most conventional loans add private mortgage insurance, typically 0.3% to 1.5% of the loan a year, and it comes out of the same monthly ceiling. Check the down payment percentage line above: if it is under 20%, subtract a realistic PMI figure from the budget before trusting the price.
Should I borrow the maximum?
The number above is what an underwriter will allow, not what is comfortable. It says nothing about retirement contributions, childcare, maintenance — budget 1% of the house price a year — or the fact that the payment is fixed while everything else in your life is not. Most people who regret a purchase were approved for it.

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