Home Affordability Calculator
Use your own numbers after reviewing the formula and worked example.
Quick answer
Home affordability is an estimate built from gross monthly income, required debts, down payment, mortgage terms and a target debt-to-income ratio.
Formula or method
Keep units, percentages and time periods consistent. The formula is useful as a transparent check on the calculator result and helps explain why changing one input changes the answer.
Step-by-step
- Convert annual gross income to monthly income.
- Choose the debt-to-income assumption.
- Subtract required monthly debt payments.
- Translate the remaining payment into a mortgage amount and add the planned down payment.
Worked example
At $100,000 annual income, gross monthly income is about $8,333. A 36% total debt allowance is about $3,000 before subtracting other debts.
How to interpret the result
Affordability is a planning estimate, not a loan approval. A comfortable budget can be lower than a lender maximum.
When the answer is used for a purchase, loan, payroll decision, construction order, school grade, health estimate or other real-world choice, verify the assumptions that matter in that context. Accurate arithmetic still depends on accurate inputs.
Common mistakes
- Using net income in one part and gross income in another.
- Ignoring taxes and insurance.
- Treating the maximum estimate as a spending target.
Frequently asked questions
Does a larger down payment help?
Usually, because it reduces the financed amount.
Does a lower rate help affordability?
Often, because the same payment can support more principal.
Should I use gross income?
Many DTI calculations use gross income, while personal budgeting should also consider take-home pay.