Home Affordability Calculator
Find out how much house you can afford using the 28/36 rule.
Enter income, debts, down payment, and interest rate for a maximum purchase price estimate.
Home affordability is calculated using three overlapping rules that lenders and financial planners use to determine how much house you can responsibly buy.
Rule 1 — The 28/36 Rule:
Max Housing Payment = Gross Monthly Income × 28%
Max Total Debt = Gross Monthly Income × 36%
Your mortgage (principal + interest + taxes + insurance) should not exceed 28% of gross monthly income. All debt combined (mortgage + car + student loans + credit cards) should not exceed 36%.
Rule 2 — Maximum Purchase Price:
Max Home Price ≈ Annual Gross Income × 3 to 4
Conservative buyers use 3×. More aggressive financing allows up to 4–5× in low-rate environments.
Rule 3 — Monthly Payment Formula (amortization):
Monthly Payment = P × [r(1+r)^n] / [(1+r)^n − 1]
Where P = loan amount, r = monthly rate, n = months.
Worked example:
Gross income: $7,500/month. Down payment: $40,000. Interest rate: 6.8%. Term: 30 years.
Max housing payment (28%): $7,500 × 0.28 = $2,100/month
Monthly rate: 6.8% / 12 = 0.567%.
Solving for P with payment = $2,100, n = 360:
P = $2,100 × [(1.00567)^360 − 1] / [0.00567 × (1.00567)^360]
(1.00567)^360 ≈ 7.69 → P ≈ $2,100 × 6.69 / 0.04359 ≈ $322,000
Max home price = $322,000 + $40,000 down = ≈ $362,000
Additional costs to include:
- Property taxes: typically 1–2% of home value per year
- Homeowners insurance: $1,000–$3,000/year
- PMI (if down payment < 20%): 0.5–1.5% of loan per year