Home Affordability Calculator
On a $120,000 salary with $500 of monthly debt payments and $30,000 saved for a down payment, the 28/36 rule supports a $2,800 monthly housing budget — about a $443,000 loan at 6.5% over 30 years, or a home price near $473,000. Each half point of rate moves that price by roughly $25,000.
Lenders tell you the maximum you can borrow. This calculator tells you the maximum you should.
The rule that sets your ceiling: housing costs should stay near 28% of gross monthly income, with all debts combined under 36%. Whichever cap binds first wins. Existing debts shrink the housing budget dollar for dollar, and property tax and insurance live inside that budget too — not on top of it.
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How This Calculator Works
Lenders work backwards from the payment a borrower can carry. The front-end ratio caps housing at 28% of gross monthly income; the back-end ratio caps all debt payments at 36%. The calculator uses the lower of the two as your maximum housing payment, then inverts the amortization formula to solve for the loan that payment supports.
The supported price adds your down payment back on. Because the payment ceiling is fixed, the price falls as rates rise — the same payment buys fewer dollars of loan at 7.5% than at 5.5%.
P = M × ((1+r)n − 1) / (r(1+r)n) — M = min(28% income, 36% income − debts)
Worked example
Using the defaults — $120,000 salary, $500 of monthly debts, $30,000 down, 6.5% for 30 years:
28% of $10,000 gross monthly income is $2,800. The 36% total-debt cap minus $500 of existing debts is $3,100. Your housing budget is the lower figure: $2,800.
Solving the amortization formula backwards, a $2,800 payment at 6.5% over 360 months supports a loan of about $443,000.
Loan + down payment = a home price near $473,000. But property tax and insurance must also fit inside the $2,800 budget, so the realistic price is lower — see the limits below.
The calculator above returns $472,990 for these inputs. That figure assumes principal and interest consume the entire budget; reserving $300 a month for tax and insurance drops the realistic price to roughly $420,000.
What the same income buys as rates move
The payment ceiling does not change when rates rise, so the price it supports does. This is why buyers recompute before shopping rather than after.
| Rate | Housing budget | Loan supported | Approx. home price |
|---|---|---|---|
| 5.5% | $2,800 | $493,141 | $523,141 |
| 6.0% | $2,800 | $467,017 | $497,017 |
| 6.5% (default) | $2,800 | $442,990 | $472,990 |
| 7.0% | $2,800 | $420,861 | $450,861 |
| 7.5% | $2,800 | $400,449 | $430,449 |
Between 5.5% and 7.5% the supported price falls by about $93,000 while the monthly budget never moves. The rate environment sets your price band as much as your income does.
Common mistakes with this calculation
- Using take-home pay in the formula. The 28/36 ratios apply to gross income. Applying them to net pay underprices what lenders allow — but that conservatism is often wise, since net pay is what actually covers the bills.
- Forgetting tax and insurance inside the budget. Property tax, homeowner insurance, PMI below 20% down, and HOA dues all consume the same 28% budget. A $2,800 ceiling is not a $2,800 principal-and-interest payment.
- Shopping at the lender maximum. The approved maximum leaves no room for maintenance (about 1% of home value a year), savings, or a rate shock on an adjustable loan. Most buyers should stay 10-15% under the number.
- Ignoring closing costs. Closing costs run 2-5% of the price. On a $473,000 home that is $9,500-$24,000 of cash needed alongside the down payment.
When this calculator does not apply
- Property tax, insurance, PMI and HOA dues are not modelled. Subtract them from the payment ceiling for a realistic principal-and-interest figure.
- The calculation assumes a fixed rate for the full term; adjustable loans start lower and can rise.
- Credit score, loan type (conventional, FHA, VA) and lender overlays change both the rate and the ratios a lender will accept.
- The model uses one income. Lenders may count documented household income you should not rely on for personal budgeting.
- Debt figures should include everything a lender would count: minimum card payments, student loans even when deferred, and co-signed obligations.
Frequently Asked Questions
What is the 28/36 rule?
A lending guideline: housing costs should stay at or below 28% of gross monthly income, and total debt payments including housing at or below 36%. Many lenders stretch beyond it, but it remains the standard sanity check for buyers.
How much house can I afford on $100,000 a year?
With no other debts, 28% of gross monthly income is $2,333. At 6.5% over 30 years that supports a loan near $369,000; with $500 of monthly debt payments the ceiling drops to about $290,000, plus your down payment.
How big should my down payment be?
Twenty percent avoids PMI and signals strength to sellers, but many buyers put down far less and pay mortgage insurance until they reach 20% equity. The right number balances PMI cost against how long you would need to save.
Does paying off my car loan really help?
Yes, directly. Every $100 of monthly debt removed raises the housing budget by $100, which supports about $15,800 more loan at 6.5% over 30 years.
Sources & Methodology
This calculator uses standard financial formulas. See our methodology page for the full derivation.
- What is a debt-to-income ratio? Consumer Financial Protection Bureau
- Owning a Home Consumer Financial Protection Bureau
- Primary Mortgage Market Survey Freddie Mac
Last reviewed .
Key takeaways
- $120,000 salary with $500 of debts and $30,000 down supports a price near $473,000 at 6.5%.
- The 28/36 rule caps housing at 28% of gross income and total debts at 36%.
- Existing debts shrink the housing budget dollar for dollar.
- Each half point of rate moves the supported price by roughly $25,000.
- Tax, insurance, PMI and closing costs must fit the same budget — plan 10-15% under the maximum.