Home Buying
Mortgage
Affordability Calculator
Current 30-yr fixed average ~7%
Combined household income before taxes
Car payments, student loans, credit cards
Maximum affordable home price
$297,484
Based on the 28% front-end DTI rule · 20% down ($59,497) · Loan: $237,987
Monthly P&I
$1,583.33
Total PITI
$1,983.33
Back-end DTI
35.1%
How this calculator works
The affordability tab uses the 28% front-end DTI rule — a standard used by most lenders — to calculate the maximum home price your income can support. It takes your gross monthly income, subtracts estimated property tax, insurance, and HOA fees, and calculates the maximum principal and interest payment that keeps your housing costs at or below 28% of income. That payment is then used to back-calculate the maximum loan and home price.
The monthly payment tab works in the other direction: given a specific home price and down payment, it calculates your exact principal and interest using the standard amortization formula, then adds the other monthly costs to show your true total payment. The amortization schedule shows exactly how each payment splits between principal and interest over the life of the loan.
Both tabs use the same interest rate and loan term so you can switch between them freely to explore different scenarios.
Front-end vs back-end DTI
Front-end DTI is housing costs ÷ gross income — lenders want this below 28%. Back-end DTI adds all monthly debts — lenders typically cap this at 43%, though some programs allow up to 50% with compensating factors.
PITI explained
PITI stands for Principal, Interest, Taxes, and Insurance — the four components of a true mortgage payment. Many calculators show only P&I, which understates the real monthly cost by hundreds of dollars.
PMI
Private Mortgage Insurance is required by most lenders when the down payment is below 20%. It typically costs 0.5–1.5% of the loan annually and is cancelled automatically once you reach 20% equity.
The 28% rule as a starting point
The 28% guideline is a conservative ceiling, not a target. Many financial advisors suggest keeping housing costs at 25% or below to maintain financial flexibility for savings, emergencies, and other goals.
Why understanding affordability before you shop matters
Most homebuyers start their search by browsing listings, then work backward to figure out what they can afford. This sequence creates a problem: once you've fallen in love with a home, the financial analysis feels like an obstacle rather than a guide. Starting with a clear affordability number reverses that dynamic and puts you in a much stronger negotiating position.
Lenders will often approve borrowers for more than they can comfortably afford. A pre-approval letter reflects what the bank is willing to lend — not what leaves you with financial breathing room for maintenance, emergencies, property tax increases, and the inevitable costs of homeownership that don't show up in a mortgage payment. The gap between "what the bank will lend" and "what you can actually afford" is where financial stress lives.
The total interest figure in the payment calculator is often the most clarifying number on this page. On a $300,000 loan at 7% over 30 years, total interest paid exceeds $418,000 — meaning you pay well over twice the loan amount by the end. This doesn't mean buying is wrong, but it changes how you think about extra principal payments, shorter loan terms, and the real cost of trading up to a more expensive home.
How to strengthen your mortgage position
01
Improve your credit score first
Your interest rate is primarily determined by your credit score. The difference between a 680 and 760 score can be 0.5–1% in rate — on a $300,000 mortgage, that's $100+ per month and over $36,000 over the life of the loan. Spending 6–12 months improving your score before applying is often the highest-return move available.
02
Pay down existing debt before applying
Every dollar of monthly debt payment reduces the mortgage you can qualify for by roughly $12–15 in loan amount. Paying off a $300/month car loan before applying can increase your qualifying mortgage by $40,000+, depending on your lender and rate.
03
Shop multiple lenders
Rate offers for the same borrower can vary by 0.5% or more between lenders. Getting quotes from at least three lenders — including a credit union and an online lender — takes a few hours and can save tens of thousands of dollars over the life of the loan. Multiple credit inquiries within a 45-day window count as a single inquiry for scoring purposes.
04
Consider a 15-year term
A 15-year mortgage typically carries a rate 0.5–0.75% lower than a 30-year, and the total interest paid is dramatically less. The monthly payment is higher, but if the 28% rule still holds at the shorter term, the long-term savings are substantial. Use the payment tab to compare both scenarios.
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