Quick answer
A home affordability calculator works from your income and debts to a maximum home price, using the lender's 28/36 rule: housing costs under 28% of gross income, all debts under 36%. On an income of $95,000 with $450 a month of other debts and $60,000 down, the housing budget is $2,217 a month — roughly a $331,750 home at 6.75%.
How the Home Affordability Calculator works, step by step
Enter your gross annual income, monthly debts (car, cards, student loans — minimum payments as a lender counts them), your down payment and a mortgage rate. The calculator applies the front-end ratio (28% of gross monthly income for housing, including tax and insurance) and the back-end ratio (36% for housing plus all other debts) and takes the lower of the two as your payment budget.
On the default figures the front-end ratio binds. Gross monthly income is $7,916.67, so the front-end limit is 28% = $2,216.67 for housing, while the back-end limit is 36% = $2,850 minus $450 of debts = $2,400. The calculator uses $2,216.67, and the result panel names the binding rule so you can see which side of your finances is doing the limiting.
It then converts the payment budget into a loan amount at your rate and term, subtracting estimated tax and insurance, and adds your down payment to reach a price. The tax and insurance assumptions move the answer a lot — the same income supports a much cheaper house in a 2% property-tax state than in a 0.5% one, which is why the tool takes your local figures rather than a national average.
Check the loan-to-value the answer implies. The default result is a $271,750 loan on a $331,750 home — an LTV of about 82%, above the 80% line where private mortgage insurance applies on a conventional loan. The tool does not add PMI to the payment, so the real monthly cost at this price would be higher than the $2,217 budget by the PMI premium — roughly $113 a month at 0.5% of the loan.
Treat the result as a lender's ceiling, not a target. Lenders approve against gross income and ignore childcare, savings goals and the rest of your actual life. Many buyers are comfortable only at 80% or so of the maximum a lender would allow; your own budget, run on take-home pay, is the binding test. A rate half a point higher would cut about $91 a month from the same payment — worth roughly $14,000 of price.
The formula
Max housing payment = min(28% × gross monthly income, 36% × gross monthly income − monthly debts). Max loan = payment available for principal and interest ÷ mortgage payment factor at the given rate and term. Max price = max loan + down payment.
Worked example — try it on the calculator above
Worked example: $95,000 income, $450 a month of debts, $60,000 down
Gross monthly income is $7,916.67. Front-end limit: 28% = $2,216.67 for housing. Back-end limit: 36% = $2,850, minus $450 of debts = $2,400 — so the front-end figure binds at $2,216.67. Assuming tax at 1.1% of value and insurance of $1,800 a year, that payment supports a price of about $331,750 with $60,000 down and a loan near $271,750 at 6.75%. The principal-and-interest share is $1,762.56 and tax is $304.10 a month. Total debt-to-income at this price is 33.7%, inside the 36% back-end cap.
Frequently Asked Questions
What do lenders actually count as debts in the back-end ratio?
The minimum monthly payments on revolving and installment debts as they appear on your credit report: car loans, student loans, credit card minimums, personal loans. Utilities, insurance premiums, rent and subscriptions do not count. For student loans in income-driven repayment, lenders use specific rules (often the actual payment, or 0.5% to 1% of the balance) that vary by loan programme.
How much do I need for a down payment?
Less than the traditional 20%: conventional loans start at 3% down for eligible buyers, FHA at 3.5%, and VA and USDA loans at 0% for eligible borrowers. But a smaller down payment means a bigger loan, a higher payment and mortgage insurance — on the example income, dropping from 20% to 5% down cuts the affordable price because the payment budget must cover a larger loan plus PMI.
Why do different calculators give me different prices?
Different ratio assumptions (some lenders stretch to 45% or higher on the back-end ratio with strong credit), different tax and insurance estimates, and whether HOA dues and PMI are included. A $200-a-month difference in assumed tax and insurance is worth roughly $25,000 to $30,000 of price at current rates.
Does a higher credit score change affordability?
Yes, through the rate. Mortgage pricing is tiered by credit score and down payment; a borrower at 780 typically pays a rate half a point or more below a borrower at 660 for the same loan. On a $271,750 loan, half a point is about $91 a month — which is itself worth roughly $14,000 of additional price at the same payment.
Estimates, not advice. This calculator provides educational estimates based on the inputs you enter and the assumptions shown on this page. It is not financial, tax or investment advice, and it cannot see your full situation. Verify important figures against official sources, and consider a qualified professional for decisions about your own money. See our Disclaimer and Methodology.