Finance & Business
House Affordability Calculator
Calculate the maximum house price you can afford based on your income, expenses, and financial situation.
Enter your details to calculate how much house you can afford
Related to House Affordability Calculator
The House Affordability Calculator uses established financial principles to determine how much house you can afford based on your income, existing debts, and other financial factors. The calculator applies two key debt-to-income ratios used by mortgage lenders: the front-end ratio and the back-end ratio.
Front-End Ratio (28% Rule)
The front-end ratio suggests that your monthly mortgage payment should not exceed 28% of your gross monthly income. This includes principal, interest, property taxes, and insurance (PITI).
Back-End Ratio (36% Rule)
The back-end ratio indicates that your total monthly debt payments, including your mortgage and other debts, should not exceed 36% of your gross monthly income.
The calculator uses these ratios along with your down payment, interest rate, and other housing costs to determine the maximum house price you can afford while maintaining financial stability. It also generates an amortization schedule to show how your loan balance would decrease over time.
The calculator provides several key metrics to help you understand your home buying power and associated costs. Understanding these results is crucial for making an informed decision about your home purchase.
Maximum House Price
This is the highest home price you can afford based on your income, debts, and down payment. This amount considers both the front-end and back-end debt ratios to ensure the purchase remains within sustainable financial limits.
Monthly Payments
The breakdown shows your estimated monthly mortgage payment, property taxes, and insurance. The total monthly payment represents your complete housing cost obligation, which should align with the 28% front-end ratio guideline.
Debt-to-Income Ratio
This percentage shows your total monthly debt payments (including the new mortgage) relative to your monthly income. A lower ratio indicates better financial health and more flexibility in your budget.
1. What factors affect how much house I can afford?
The main factors are your annual income, monthly debts, down payment amount, interest rate, loan term, property taxes, and insurance costs. Your credit score also plays a crucial role as it affects the interest rate you might receive, though this calculator assumes you qualify for the rate entered.
2. Why are there two different debt ratio rules (28% and 36%)?
The 28% rule (front-end ratio) focuses solely on housing costs to ensure you're not overspending on housing alone. The 36% rule (back-end ratio) considers all debt payments to ensure you maintain overall financial stability. The calculator uses whichever ratio produces the lower maximum house price to stay conservative.
3. Should I borrow the maximum amount I can afford?
Not necessarily. The calculator shows the maximum amount based on traditional lending guidelines, but you might want to borrow less to have more financial flexibility. Consider future goals, potential income changes, and other financial obligations when deciding how much to borrow.
4. What costs aren't included in this calculation?
The calculator doesn't include maintenance costs, utilities, HOA fees, mortgage insurance (if down payment is less than 20%), or other discretionary expenses. It also doesn't account for potential property value appreciation or tax benefits from mortgage interest deductions.
5. What is the scientific source for this calculator?
This calculator is based on established mortgage lending principles and guidelines from financial institutions and regulatory bodies. The 28/36 debt-to-income ratio rules are standard practices documented by major mortgage lenders and housing authorities. The mortgage payment calculations use the standard amortization formula: PMT = P[r(1+r)^n]/[(1+r)^n-1], where P is principal, r is monthly interest rate, and n is total number of payments. These principles are outlined in financial literature and endorsed by organizations such as the Financial Conduct Authority (FCA) and major UK mortgage lenders. The property tax and insurance calculations follow standard industry practices for estimating total housing costs.