HesapHanem

Home Affordability Calculator

How much house you can afford

How it is calculated

Steps: the monthly payment limit is P = income × DTI / 100, where income is gross monthly income. The monthly rate is r = rate / 100 / 12 and the number of payments is n = years × 12. The loan that payment can service is Loan = P × (1 − (1 + r)−n) / r, or P × n if the rate is 0. The home price is Loan + down payment.

The whole payment limit is treated as principal and interest on the loan. Property tax, homeowners insurance, mortgage insurance and HOA fees are not taken out of it, so in reality the loan you can afford is lower if those are part of your housing ratio. Income, DTI, years must be above zero; rate and down payment cannot be negative. Lender rules and the DTI limit vary by country and loan type, so treat the DTI as your own choice.

Worked example

Gross monthly income 6,000, housing DTI 28%, rate 6.5% over 30 years, down payment 40,000. Payment limit: 6,000 × 0.28 = $1,680.00. Monthly rate = 0.065 / 12 ≈ 0.005417 and n = 360. The annuity factor (1 − 1.005417−360) / 0.005417 ≈ 158.2, so the loan is 1,680 × 158.2 ≈ $265,794.18. Adding the down payment of 40,000 gives a maximum home price of $305,794.18.

Try this example →

Common mistakes

  • Entering annual income. The field is monthly gross income, so 72,000 a year should be entered as 6000.
  • Entering net (take-home) pay instead of gross. DTI limits are normally defined on gross income.
  • Expecting taxes and insurance to be deducted. The tool puts the full payment into principal and interest, so the result is optimistic if your 28% has to include them.
  • Typing the rate as a decimal (0.065). It is a percentage, so enter 6.5.
  • Treating the price as a guarantee of approval. Lenders also look at other debts, credit history and reserves, and the limit can change with the interest rate you actually get.

Sources

About this calculator

This calculator applies the classic mortgage 28/36 rule: your housing payment should generally stay at or below 28% of gross monthly income, while total debt payments stay at or below 36%. You enter the income share for the housing payment (28% by default); the 36% total-debt limit is not tested, so factor in your other debts yourself. The calculator treats that monthly payment as loan principal and interest only, so taxes and insurance are not deducted, and works backward through the loan's interest rate and term to solve for the maximum home price your down payment and income can support.

First-time buyers use it before house-hunting to set a realistic price range, and mortgage lenders use the same debt-to-income logic during pre-approval to decide how large a loan they'll actually offer. Because the result shifts a lot with interest rates, it's worth rerunning whenever rates move or you're comparing a 15-year versus 30-year term.

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Comments (1)

  • Editorial team

    The payment limit here is treated as principal and interest only, so it overstates what fits once property tax and insurance are added. One way to handle that is to lower the percentage box instead of keeping 28. If you expect about 400 a month in tax and insurance on a 6,000 monthly income, that is roughly 6.7 points, so try about 21. The 36 percent total-debt limit is not tested. Which share do you use for housing?

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