Mortgage Affordability Calculator

Lenders cap your total debt payments at a share of gross monthly income. Subtract what you already owe each month and what is left is the housing budget. That budget has to cover principal, interest, property tax and insurance, and tax depends on the price you are solving for. Writing it out and rearranging gives the loan directly: loan = (budget - down x taxRate / 12 - insurance / 12) / (f + taxRate / 12), where f is the monthly payment on one dollar of loan. The affordable price is that loan plus the down payment.

What is the 28/36 rule?

A long-standing guideline: housing costs no more than 28 percent of gross income, and all debts together no more than 36 percent. It predates modern underwriting and is stricter than what many lenders will approve today, which makes it a good sanity check rather than a legal limit.

Does this mean I should borrow the maximum?

No. This is the ceiling a lender applies, and a lender does not know about your childcare costs, your retirement contributions or your job security. Most people who regret a purchase borrowed near the top of this number, not near the middle of it.

Why does paying off a car loan raise my budget so much?

Because the allowance is a fixed share of income, so every dollar of other debt takes a dollar from the housing budget - and a dollar of monthly payment supports roughly 150 to 170 dollars of mortgage at current rates. Clearing a 400 dollar car payment can move the affordable price by 60,000 dollars or more.

Is gross or net income used?

Gross, before any tax or deduction. It is one reason the affordable figure can look generous next to what actually lands in your account, and a good argument for running the number against take-home pay as well before committing.