Mortgage Affordability Calculator

What this calculator does

“How much house can I afford?” is really a question about monthly cash flow, not house prices. This calculator works the way an underwriter does: it starts from your gross income, applies the 28/36 affordability caps, subtracts your existing debts and the property’s carrying costs, and only then converts the surviving monthly budget into a loan — and the loan plus your down payment into a price. The result shows which constraint binds you (housing cap or total-debt cap), so you know exactly which lever to pull to afford more.

How the math works

Three steps, in the order lenders think:

1. Housing budget = the lesser of 28% of gross monthly income, or 36% of income minus existing debt payments.
2. P&I budget = housing budget − monthly property tax and insurance.
3. Maximum loan — inverse amortization, solving the standard payment formula for principal:

P = M · ((1 + r)ⁿ − 1) / (r(1 + r)ⁿ)

Maximum price = loan + down payment.

A worked example

Household income $96,000 ($8,000/month), $500 in existing monthly debts, $40,000 down, 6.5% for 30 years, $400 monthly tax and insurance:

• Housing cap: 28% × 8,000 = $2,240; total-debt cap: 36% × 8,000 − 500 = $2,380. The housing cap binds.
• P&I budget: 2,240 − 400 = $1,840
• Maximum loan: about $291,100 — the principal $1,840/month supports at 6.5% over 30 years
• Maximum price ≈ $331,100 with the down payment

Now watch the debt lever: raise existing debts to $1,500/month and the total-debt cap drops to $1,380, undercutting the housing cap — the affordable price falls by roughly $136,000. Once the debt cap binds, every monthly debt dollar you eliminate buys back about $158 of loan, so clearing a $460 car payment before house-hunting can restore roughly $70,000 of buying power.

Practical tips

1. Budget backward from your own comfort, not the cap. The 28% cap assumes average spending. If you have childcare costs, high medical expenses, or aggressive savings goals, decide your own housing number first and treat the calculator’s answer as an upper bound.
2. Kill small debts before applying. When the total-debt cap binds, a $300/month card minimum reduces your housing budget by $300 — which at 6.5%/30yr is roughly $47,000 of loan. Small balances are cheap to clear and expensive to keep.
3. Don’t forget the costs beyond PITI. Maintenance (commonly estimated at 1% of home value per year), utilities on a bigger space, and HOA dues live outside the DTI math but inside your actual budget.
4. Rate-shop before price-shop. At a $1,840 P&I budget, the difference between 6.5% and 6.0% is about $16,000 of extra loan. A half-point of rate is worth more than most negotiation wins on price.

Which constraint binds — and why it matters

The calculator names the binding cap. If it’s the housing (28%) cap, your income is the limit: only more income or a smaller tax/insurance bill raises the number. If it’s the total-debt (36%) cap, your existing debts are the limit — every dollar of monthly payment you eliminate converts to about $158 of additional loan at 6.5% over 30 years. Check your position with the DTI calculator, then model the actual monthly payment on the mortgage calculator before you fall in love with a listing.