How Much Home Can You Afford?
When you’re thinking about buying a home, figuring out how much you can afford is a great first step. Use our home affordability calculator to get an estimate!
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Based on the values you provided, you may be able to afford a home worth up to $270,000
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Based on the values you provided, you may be able to afford a home worth up to
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What Is Home Affordability?
Mortgage lenders often estimate home prices you can afford by comparing your monthly gross income to your total monthly debt payments, including your mortgage payment on a new home.
Lenders do this because they want to be sure you can afford your monthly mortgage payment and other debt payments you may have, as well as living expenses, like food and clothing.
To make an estimate of affordability, lenders frequently calculate a percentage called a debt-to-income ratio or “DTI.” Here’s an example:
| Monthly gross income | $10,000 |
| Monthly non-mortgage debt payments | $1,000 |
| Monthly mortgage payment | $2,600 |
| Total monthly debt payments | $3,600 |
| Calculation: $3,600 ÷ $10,000 = 0.36 | |
| Debt-to-income ratio | 36% |
We used a 36% debt-to-income ratio, because this is the maximum DTI many homebuyers can have and still qualify for a mortgage.
Our home affordability calculator uses a debt-to-income ratio as part of its calculations. It also considers the costs of your loan's principal, interest, property taxes, and homeowners insurance, because they are included in your monthly mortgage payment.
Each of these costs can affect the prices of homes you can afford. For example, when interest rates are higher, you may be able to afford less expensive homes, because more of your monthly payment goes toward interest.
Finally, the size of your down payment affects prices you can afford. When you have more money for a down payment, you can generally afford a more expensive home.
How to Use a Home Affordability Calculator
Our calculator asks you to fill in information about your finances, the interest rate you think you might get on a new mortgage, how many years you'll need to pay off the mortgage (the loan's "term"), and an estimate of the tax and insurance costs of the home you want to buy.
- Annual gross income
- Monthly debt payments
- Down payment
- Loan term
- Interest rate
- Property taxes and homeowners insurance
With this information, the calculator can give you an estimate of affordable home prices within the bigger picture of your monthly expenses and income.
By entering different numbers into the calculator, you can see how they impact your affordability. Keep in mind, this is just an estimate, meant to be one tool that helps you focus your search on houses that fit your budget. You can also estimate affordable home prices by getting prequalified.
How a Home Affordability Calculator Can Help You
Price is maybe the most important part of your homebuying decision, which is why understanding how much house you can afford and establishing a budget can help you look with more confidence.
You’ll also want to consider the size of the home, the number of bedrooms and bathrooms, the quality of the neighborhood and schools, the distance from your work, and more.