House Affordability Calculator
Understanding House Affordability
Determining how much house you can afford is crucial before starting your home search. Our calculator helps you estimate your maximum home price based on your income, debts, down payment, and current interest rates.
Key Factors in Home Affordability
- Income: Your gross (before tax) income is the foundation of affordability calculations
- Debts: Existing loan payments (car, student loans, credit cards) reduce what you can spend on housing
- Down Payment: A larger down payment reduces your loan amount and monthly payments
- Interest Rate: Current mortgage rates significantly impact your monthly payment
- Loan Term: Longer terms (30 years) mean lower payments but more interest paid overall
- Other Costs: Property taxes, insurance, PMI, and HOA fees add to monthly expenses
Standard Affordability Rules
36% Rule: Total debt payments (including housing) should not exceed 36% of gross monthly income
Example: Calculating Maximum Payment
For a $6,000 monthly income with $500 in existing debts:
- 28% housing rule: $6,000 × 0.28 = $1,680 maximum housing payment
- 36% total debt rule: ($6,000 × 0.36) - $500 = $1,660 maximum housing payment
The lower of these ($1,660) would be your maximum affordable payment.
How Down Payments Affect Affordability
A larger down payment increases your purchasing power in several ways:
- Reduces the loan amount needed
- May eliminate Private Mortgage Insurance (PMI) requirements (typically when down payment ≥20%)
- Can qualify you for better interest rates
- Results in lower monthly payments
PMI = (Loan Amount × PMI Rate) ÷ 12 (if down payment < 20%)
Example: $300,000 Home with Different Down Payments
10% Down ($30,000):
- Loan amount: $270,000
- PMI: ~$112/month (0.5% rate)
20% Down ($60,000):
- Loan amount: $240,000
- No PMI required
Savings: $112/month + lower principal balance
Additional Costs of Homeownership
Property Taxes
Annual taxes vary by location, typically 0.5%-2% of home value. Some areas have much higher rates.
Home Insurance
Annual premiums average $1,200 but vary by location, home value, and coverage.
Private Mortgage Insurance (PMI)
Required for conventional loans with <20% down payment, typically 0.5%-1% of loan amount annually.
Homeowners Association (HOA) Fees
Monthly fees for condos and some neighborhoods, ranging from $100-$1000+ depending on amenities.
Maintenance Costs
Budget 1%-3% of home value annually for repairs and maintenance.
Improving Your Home Affordability
Ways to Increase Purchasing Power
- Increase down payment: Save more or explore down payment assistance programs
- Pay down debts: Lowering your debt-to-income ratio increases what you can borrow
- Improve credit score: Higher scores qualify for better interest rates
- Consider different loan types: FHA, VA, and USDA loans have different requirements
- Look for lower-tax areas: Property taxes significantly impact monthly payments
- Buy points: Pay upfront to lower your interest rate
Frequently Asked Questions
Q: How much house can I afford on a $100,000 salary?
A: With a $100,000 salary, 20% down payment, 6.5% interest rate, and $500/month in debts, you could typically afford a $400,000-$450,000 home with a monthly payment around $2,300-$2,600 including taxes and insurance.
Q: What's included in the 28% housing ratio?
A: The 28% includes principal, interest, property taxes, home insurance, PMI, and HOA fees. It doesn't include utilities, maintenance, or other living expenses.
Q: Can I buy a house with less than 20% down?
A: Yes, many loan programs allow down payments as low as 3%-3.5% (FHA loans), but you'll pay PMI until you reach 20% equity. Some conventional loans offer 3% down options.
Q: How does my credit score affect affordability?
A: Higher credit scores qualify for lower interest rates. For example, a 760+ score might get 6.5% while a 620 score might get 7.5% - on a $300,000 loan, that's ~$200/month difference.
Q: Should I buy at the top of my budget?
A: Generally no. Lenders approve based on gross income, but your net income after taxes must cover all living expenses. Leaving room in your budget helps handle unexpected costs and life changes.